The IRS Proposes Child Tax Credit Expansion To Benefit 16 Million Low-Income Children

By Thea Felicity

Feb 22, 2024 12:21 PM EST

(Photo : Photo by Joe Raedle/Getty Images)
MIAMI, FLORIDA - FEBRUARY 14: Juliana Escoto,2, waits for her father to be married during a Valentine's Day wedding ceremony on the steps of the Miami-Dade County Courthouse on February 14, 2024, in Miami, Florida. Twenty couples tied the knot in an outdoor service conducted by the Miami-Dade Clerk of Courts Marriage License Bureau.

As the 2024 tax season progresses, the Senate and House deliberate on the Tax Relief for American Families and Workers Act of 2024. This time, aiming to bolster the child tax credit for lower-income families with children over the next three years.

According to CNET, the proposed legislation seeks to raise the maximum refundable amount per child. This could potentially benefit 16 million children in low-income families in its inaugural year alone.

If the bill passes, IRS Commissioner Daniel Werfel assures swift implementation of the expanded credit, with adjustments automatically made for eligible taxpayers who have already filed their returns.

Under the proposed changes, the child tax credit would remain partially refundable, with the maximum refundable amount per child increasing gradually over the next three tax years, reaching $2,000 by 2025.

While the 2021 pandemic relief measures temporarily increased the child tax credit, the proposed expansion aims to provide sustained support to lower-income families, potentially doubling credits for some households.

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Who Are Eligible for The New Child Tax Credit?

Eligibility criteria mirror existing guidelines, emphasizing income thresholds, dependent status, and residency requirements.

Firstly, their modified adjusted gross income (MAGI) should not exceed $200,000 for single filers or $400,000 for those filing jointly. Additionally, the child claimed for the credit must have been under 17 years old as of December 31, 2023, and possess a valid Social Security number. 

Eligible relationships for the child include being a legally recognized child, stepchild, foster child, sibling, half-sibling, or descendant of one of these categories. 

The child must also have contributed less than half of their financial support and resided with the taxpayer for more than half of the tax year. 

Furthermore, the child must be claimed as a dependent on the taxpayer's return, and the taxpayer themselves must be a US citizen or resident alien. Meeting these stringent criteria ensures eligibility for the new Child Tax Credit, as the proposed legislation delineates.

Unlike the 2021 model, where monthly advance payments were distributed, the proposed expansion would be claimed upon filing tax returns, ensuring timely disbursement of owed credits.

At the moment, the fate of the expanded child tax credit rests on Senate approval, with President Joe Biden's administration advocating for its passage to support struggling families during challenging economic times.

READ MORE: US Treasury Department Unveils New Tax Credit Guidelines for Sustainable Aviation Fuel

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