The child tax credit (CTC) helps working families by reducing their federal income tax. Congress is considering expanding the CTC in 2024, which could provide more financial relief to millions of households. This article explains what the proposed child tax credit increase entails and who stands to benefit most.
How Might the Child Tax Credit Increase in 2024?
Currently, the CTC provides families with up to $2,000 per child under age 17. Under a new bipartisan proposal, the CTC would increase in 2024 in the following ways:
- The refundable portion of the CTC would rise to $2,000 per child, up from $1,600 currently. This helps lower-income families who don’t owe enough taxes to claim the full $2,000 credit.
- The CTC amount would adjust for inflation starting in 2024. This would provide an estimated additional $100 per child when it takes effect.
- Lower-income families with multiple children would get the full $2,000 CTC for each child instead of a reduced amount after the first.
- Families who qualify based on 2023 income can use that if their 2024 income falls. This helps families with volatile incomes.
These changes aim to extend more CTC benefits to low- and middle-income families who need it most.
Who Stands to Benefit from a Larger Child Tax Credit in 2024?
According to analysis, an expanded 2024 CTC would have the following impacts:
- Lift up to 500,000 children above the poverty line.
- Make 4 million additional children less poor by raising family incomes closer to the poverty line.
- Provide the greatest benefits to families earning under $50,000 per year with multiple children.
- Help around 90% of the 21 million children who currently only get a partial credit or none due to low parental incomes.
Overall, increasing the refundable portion and removing family size limits would channel the most benefits to where they are needed most. Even modest expansions can significantly improve child poverty.
Why Did the Child Tax Credit Increase Before?
During the COVID-19 pandemic, the CTC saw a major temporary expansion under the American Rescue Plan Act of 2021. That legislation:
- Increased the maximum CTC amount to $3,600 for children under 6 and $3,000 for older children.
- Made the full credit amount refundable regardless of income.
- Sent half the CTC as advance monthly payments to families.
According to the Center on Poverty and Social Policy, this CTC expansion kept 3.7 million children out of poverty in 2021. But child poverty spiked back up after it expired at the end of 2021.
The current CTC proposal does not go as far as the pandemic expansion. But policymakers hope even targeted improvements will help struggling families.
How Can Congress Pay for a Larger Child Tax Credit in 2024?
The estimated $82 billion cost of the proposed 2024 CTC expansion would be offset by added tax enforcement funding. This would prevent further tax evasion without burdening compliant taxpayers.
The deal also extends some business tax incentives favored by Republicans, while Democrats get priorities like the CTC increase. The offsets allow both parties to claim victories.
What Are the Chances of Passing an Expanded Child Tax Credit for 2024?
Congress faces time pressure to approve the 2024 CTC expansion by late 2023 to take effect for tax returns filed in early 2025. Some key obstacles remain:
- Technical challenges for the IRS to swiftly implement changes.
- Reluctance from some Republican lawmakers.
- Concerns over business tax incentive extensions.
- Resistance to added IRS tax enforcement funding.
Still, leaders like Sen. Michael Bennet (D-CO) hope to prioritize passing the CTC boost quickly. The benefits for millions of children make it worth the effort.
Frequently Asked Questions About the Potential 2024 Child Tax Credit Increase
How much extra money could I get from the larger 2024 CTC per child?
- For a family with two children earning $17,000, the CTC would rise by $1,800 in 2024.
- A middle-income family with three kids would likely see about a $750 increase.
- Higher-income families who already claim the full $2,000 per child would not get more initially.
Who will not receive any additional child tax credit in 2024?
- Families earning over $230,000 with a single tax return or $450,000 filing jointly.
- Children aged 17 to 18 years old and full-time college students ages 19 to 24.
- Families who do not meet minimum earned income requirements.
- Immigrant families without Social Security Numbers valid for employment.
- Parents who haven’t claimed children as dependents on tax returns.
Will monthly CTC payments come back if the 2024 credit expands?
No, the proposed 2024 increase does not include restarting monthly advance CTC payments as in 2021. Families would claim the larger CTC when filing their 2024 taxes in early 2025.
How can I make sure I receive the maximum 2024 child tax credit benefit?
- File your latest tax return as soon as possible, even before legislation passes.
- Verify children are listed properly as dependents.
- Check you meet income requirements based on your most recent return.
- Update direct deposit and mailing information with the IRS.
- Consult a tax professional if you have questions about eligibility.
Could a different version of the 2024 CTC increase happen instead?
Yes, some Democrats want to pass a larger CTC expansion more akin to the American Rescue Plan’s version. But that likely lacks Republican support for now. Congress could revisit the CTC again later, but the current deal provides the best chance for near-term improvement.
The Bottom Line
Increasing the child tax credit would provide meaningful financial relief to millions of lower-income and middle-class families struggling with costs and inflation. While eligibility rules remain, raising the refundable portion to $2,000 per child and removing family size limits would better target benefits to where need exists. Contact your representatives in Congress to voice your support if you want to see the CTC expansion passed swiftly and delivered to those who need it most.
