(NewsNation) — Millions of families stand to gain from changes to the federal child tax credit included in a bipartisan bill passed by the House last week.
Low-income families, especially those with multiple children, would be helped the most. A majority of families earning less than $21,000 would see a tax cut under the new provisions, according to the Urban-Brookings Tax Policy Center.
Sen. Mark R. Warner (D-VA) released the following statement:
“I am encouraged by today’s House passage of a bipartisan tax bill that would lift nearly half a million U.S. children out of poverty. As we saw during the pandemic, expanding the Child Tax Credit is a tried-and-true way to give struggling families a meaningful boost and help put food in the mouths of needy children. Especially now, with tax season around the corner, this legislation could provide near-immediate breathing room for millions of working families who live paycheck to paycheck – but only if the Senate acts quickly. As this bill makes its way to the Senate, I look forward to working with my colleagues on both sides of the aisle to deliver for American families.”
Here’s a look at the tax credit and who stands to benefit.
What’s changing about the tax credit?
Currently, the tax credit offers a break of up to $2,000 per child, with potentially $1,600 of that being refundable.
The bill would incrementally raise the amount of the credit available as a refund, increasing it to $1,800 for 2023 tax returns, $1,900 for the following year, and $2,000 for 2025 tax returns. The bill also adjusts the topline credit amount to temporarily grow at the rate of inflation.
The bill keeps a threshold of a household having $2,500 in income to be eligible for refundable child tax credit payments.
It would not be a return to monthly payments established in 2021 under the American Rescue Plan.
To qualify, children must have a Social Security number and be an eligible dependent. Full criteria can be found on the Internal Revenue Service website.
How much would tax bills be reduced?
On average, households the tax credit benefits would see a tax cut of $680 in 2023, according to the Tax Policy Center.
About half of households with income under $21,000 a year would see a tax cut, and the same is true for just under a quarter of households making less than $40,500 a year.
But the bill would also benefit the top 1% of income earners — those making above $980,000. Those households would see an after-tax income boost of 0.5% ($9,500) in 2023, according to the Center’s estimates.
Comparatively, households in the lowest income quintile (under $21,000 a year) would see after-tax gains averaging 0.3% ($60) in 2023.
In total, just over 16% of Americans would have a lower tax bill as a result of the changes.
What’s next in Congress?
Before Americans see any benefits from the new tax provisions, the bill has to be passed by the Senate first. Its fate there is uncertain, with one Republican senator already signaling some in his party may be reluctant to give President Joe Biden a victory to campaign on for the November election.
Senate Republicans are angry they were cut out of negotiations between Senate Finance Committee Chair Ron Wyden (D-Ore.), and House Ways and Means Committee Chair Jason Smith (R-Mo).
They say the bill would make the child tax credit (CTC) available to tens of thousands of migrants who are being paroled into the country by the Biden administration.
If it can clear hurdles, the bill does stand to benefit low-income Americans the most.
The bill also would enhance a tax credit for the construction or rehabilitation of rental housing targeted to lower-income households, adding an estimated 200,000 housing units around the country.
The Associated Press contributed to this report.