In an effort to provide a financial helping hand to families, the U.S. government will be introducing the new Child Tax Credit policy starting from the year 2024. The bill, officially known as the Tax Relief for American Families and Workers Act of 2024, has already garnered bipartisan support in the House and will soon be considered in the Senate. As the bill becomes law, the main question is, who qualifies? And how much will they get? Let’s break down the details.
Who Qualifies?
Eligibility for this valuable credit extends to children under the age of 17 possessing a Social Security number by the end of the calendar year. If your child has lived with you for over half the year and you can declare them as a dependent, you can qualify to claim the credit. Read Also: How to Maximize Your Social Security Benefits in the US
Foster parents and other family members, such as grandparents or stepparents, can also claim the benefit as long as the child meets the IRS’s eligibility standards. Be aware, however, that high-income households may face limitations on the amount they can claim. To receive the full credit, single filers need to have adjusted gross incomes of less than $200,000, while joint filers should have incomes below $400,000. The credit amount decreases by $50 for every $1,000 above these figures.
How Much Will You Receive?
The credit amount remains at $2,000 per child, with a partial refund available, offering up to $1,600 back in the annual tax refund in cases where no taxes are owed. The forthcoming bill proposes changes to expand the refundable nature of the credit. This means that the maximum refundable amount will grow to $1,800 per child in 2023, $1,900 in 2024, and $2,000 in 2025. If inflation occurs, the credit amount will be adjusted upwards in 2024 and 2025. Read Also: Breaking Free from the Black Tax Cycle
What Changes Can We Expect from This Policy?
The proposed modifications aim to simplify the process for families to qualify for this credit. For calculations, taxpayers can use their income from either the current or prior year, a move that benefits those whose incomes drop, possibly disqualifying them from the credit. Moreover, the new law aims to eradicate a loophole restricting credit for some poor families. The reformed law will ensure credit calculations factor in a parent’s income, multiplied by 15% and the family’s number of children. This change will permit families with multiple children and lower incomes to qualify for a larger credit.
What’s Next?
Senate majority leader Chuck Schumer has voiced his support for the bill, although they have not yet scheduled the Senate vote. In conjunction with Finance Committee Chair Sen. Wyden, Schumer is strategizing the best path forward.
Bottom Line
In conclusion, parents and guardians need to follow the progress of this bill. Consult a tax professional or refer to official IRS guidelines for the most accurate, up-to-date information on eligibility and claiming the Child Tax Credit in 2024.