Lawmakers Are Pushing a Boosted Child Tax Credit Once Again

In 2021, when the U.S. economy was hurting in the wake of the pandemic, lawmakers provided relief with a boosted Child Tax Credit. Not only did the credit's maximum value increase, but the credit itself became fully refundable, which meant parents could receive its full value even if they had no tax liability. Also, the credit was paid in monthly installments so recipients didn't have to wait to file a tax return to see that money hit their bank accounts.

The enhanced version of the tax credit expired at the end of 2021. This doesn't mean the Child Tax Credit disappeared in 2022. Rather, it simply reverted to its original value of $2,000 (in 2021, it was worth up to $3,600 per child).

Also, the credit stopped being fully refundable. As of 2023, the refundable value of the credit was limited to $1,600 per child.

But recently, bipartisan lawmakers introduced the Tax Relief for American Families and Workers Act of 2024. And an enhanced Child Tax Credit is a big component of it.

Could the Child Tax Credit improve?

Lawmakers are not necessarily looking to increase the value of the Child Tax Credit. But they're looking to make it more refundable so more families can collect that money.

As of 2023, the maximum refundable portion of the credit is limited to $1,600 per child for 2023. The new proposal seeks to increase the maximum refundable amount as follows:

• $1,800 for tax year 2023
• $1,900 in tax year 2024
• $2,000 in tax year 2025

The first line item would clearly have to be retroactive. If the rule is implemented before tax filers start submitting their 2023 taxes, it could change the extent to which many are eligible for refunds this year.

The new law would also expand refundability for families with multiple children. Currently, the maximum refundable portion of the Child Tax Credit is calculated by taking a taxpayer's earned income over $2,500 and multiplying it by 15%. The new law would then have that taxpayer multiplying that amount per child.

How likely is this to pass?

Lawmakers have been fighting for a better Child Tax Credit for years. What makes this proposal feasible is that it has bipartisan support, which is always a positive thing. And unlike other proposals, it's not looking to boost the maximum value of the credit. Rather, this proposal focuses on refundability.

Granted, that's still going to cost the government money. But it may be a more palatable suggestion in the eyes of lawmakers who have previously balked at increasing the credit's maximum value.

All told, many families are struggling these days due to factors that include high borrowing costs and lingering inflation. Getting more money out of the Child Tax Credit could be a lifeline for those whose savings are depleted and finances need a lift. We'll have to wait and see what happens.

For now, if you're a parent who's struggling, there may be different benefits available to you. It pays to see if you qualify for food benefits through programs like SNAP, or if your children are eligible for reduced or free lunch and breakfast through your local school district. If you call your superintendent's office, you should be able to connect with someone who can tell you how to apply for free or reduced school meals.