Moving through Congressional approval, a sizeable chunk of a $78 billion tax cut bill is directed toward expanding the Federal child tax credit. Primed to benefit lower-income families, this move is projected to assist an estimated 2 million children across California, according to data from the Center on Budget and Policy Priorities in Washington.
Navigating Tax Benefits
The tax plan aims to simplify the process for lower-income families to avail of the credit. It also plans an increase in the available amounts. Forming part of a compromise package, the bill reflects a meeting of interests between conservatives looking for more business incentives and Democrats working to reinstate some child tax benefits that ceased with the end of COVID-19 relief benefits. Approved in the House on January 31 with remarkable bipartisan support, the Senate will deliberate on it next.
Child Tax Credit, in Present and Future
Families that qualify can avail a child credit of $2,000 per child for children below 17, provided the taxpayer income is lower than $200,000 for head-of-household filers and $400,000 for joint filers to claim the full credit. Registering $3,600 per child during the COVID-19 period, it was established that this shift significantly helped alleviate child poverty.
Staying consistent, the credit remains at $2,000, permitting a qualifying taxpayer to deduct this amount from their taxes. The Child Tax Credit, being partly refundable, ensures that a tax refund break can be received even if a person has too little income to derive a credit deduction or does not have a tax liability. Currently, families can claim a maximum refund of $1,600. As part of the bill, these amounts are expected to be increased to $1,800 for taxes due this April, $1,900 for this year, and the maximum credit for the following year.
Benefit Increases for Lower Earners
Families earning less than $27,700 annually expect their average tax credit to increase by $1,040 by next year. With an income bracket between $27,700 and $53,300, families could see a $500 rise in their credit based on estimates from the progressive Washington research group, the Institute on Taxation and Economic Policy.
ALSO READ : Entrepreneurs Surface Business Succession Planning Challenges Before Congressional Committee
Aid to Lower Earners
Compiling examples of potential beneficiaries, the Center on Budget and Policy Priorities suggests that a single mother who earns $24,000 annually working as a gas station cashier while raising a toddler and an elementary school child would see her credit increase by $400 to $3,920. A farm worker parent earning $32,000 yearly with a spouse looking after three young children at home would see their credit increase by $975 to $5,830 under the new legislation. A solo parent who works as a home health aide with an annual income of $18,000 could benefit from an uplift of $1,275 per child in the first year, culminating in a $1,800 per child credit.
The center also estimates that more than 400,000 cashiers nationwide and their families will see benefits, with increases in credit likely for 280,000 janitors and building cleaners, 250,000 nursing assistants, 240,000 waitresses and waiters, and 340,000 home health aides and housekeeping cleaners.
Voices in Congress
While revitalizing the incomes of many lower-income families, some Congressional progressives criticize the tax breaks as insufficient. While all Republicans and other state Democrats voted for the bill, five California Democrats did not. Rep. Linda Sanchez of Norwalk, a tax-writing House Ways and Means Committee member, criticized the tax deal, asserting that it left too many working- and middle-class households in the lurch. Also, a committee member, Rep. Judy Chu from Pasadena, acknowledged that more work remains to be done but emphasized that the bill would bring hundreds of thousands of children out of poverty. And increase benefits for lower-income families of 2 million children.
