House lawmakers have advanced a $78 billion bipartisan tax package, which includes pivotal changes to the child tax credit for the 2023 filing season. As tax season looms, the proposed adjustments aim to provide substantial relief to millions of families, potentially increasing the average tax cut to $680, according to the Urban-Brookings Tax Policy Center.
The child tax credit, a critical component of the tax code for families, currently offers up to $2,000 per qualifying child under age 17. The credit phases out for individuals earning more than $200,000 and married couples making over $400,000. Currently, up to $1,600 of the credit is refundable, but the proposed changes could significantly expand access to this benefit, particularly for lower-income families.
Under the new proposal, the refundable portion of the child tax credit would increase incrementally over the next three years-rising to $1,800 for the 2023 tax year, $1,900 for 2024, and reaching $2,000 by 2025. This adjustment is designed to make the credit more accessible to families with multiple children, who under the current system, may receive the same total credit as a family with a single child at the same income level.
The proposed formula for calculating the maximum refundable credit would shift from a percentage of earned income above $2,500 to a per-child basis, allowing families to multiply the calculated amount by the number of qualifying children. This change aims to address the disparity in benefits received by higher versus lower-income families.
Despite the promise of these adjustments, the path forward for the tax bill remains uncertain, with negotiations ongoing and the House on recess. Taxpayers are advised to stay informed as the situation develops, particularly those who depend on the child tax credit for financial relief.
For families already receiving the full $2,000 child tax credit, the proposed changes for 2023 might not offer additional benefits. However, the plan to adjust the maximum overall credit for inflation in subsequent years could provide a modest increase for all recipients.
As the legislative process unfolds, tax experts suggest that some families may consider delaying their tax filings until the child tax credit revisions are finalized, especially given the potential for retroactive application to the 2023 tax year. However, for many Americans living paycheck to paycheck, waiting is not a viable option.
The proposed changes to the child tax credit represent a significant shift in tax policy, aimed at providing more substantial support to families in need. While the outcome remains uncertain, the bipartisan support for the adjustments suggests a recognition of the importance of the child tax credit in supporting American families. As the debate continues, the potential impact on millions of households hangs in the balance, underscoring the critical role of tax policy in shaping the economic well-being of the nation's families.
