Uplifting Our Families: Child Tax Credit to Boost Financial Stability
With the many challenges posed by today’s economy, we understand the importance of maximizing our financial resources to support our families. With tax season behind us for this year, it's never too early to plan ahead and take advantage of tax credits and breaks that can uplift our families. One main tax credit that you may qualify for is the child tax credit, designed to help us all thrive and achieve financial stability.
Changes to the Child Tax Credit
In 2021, President Biden signed the American Rescue Plan into law, which included the One-Year Child Tax Credit Expansion. This significant change empowered American families by increasing the credit to $3,000 per child (or $3,600 per child under the age of 6). Moreover, the credit became fully refundable, ensuring that families who have resided in the U.S. for more than six months during 2021 can benefit, regardless of their earnings. To provide immediate support, the IRS sent monthly payments to eligible families from July to December 2021.
The expanded tax credit had a massive impact, driving child poverty down to a record low of 5.2% in 2021. It kept 2.1 million children above the poverty line, including 524,000 Black children.
However, it is disheartening to note that the one-year child tax credit expansion ended at the end of 2021 when Republicans and Senator Manchin let it expire. Now, families applying for the credit can only receive up to $2,000 per child under the age of 17, and it is only partially refundable. This means that if the credit exceeds your tax liability, you will only receive a refund for the difference.
To claim the Child Tax Credit, you need to include your children and other dependents on Form 1040, U.S. Individual Income Tax Return, and attach a completed Schedule 8812, Credits for Qualifying Children and Other Dependents.
Efforts to Make the Child Tax Credit Expansion Permanent
While Biden's one-year child tax credit expansion expired at the end of 2021, Democrats in Congress are working to make these expansions permanent, providing lasting assistance to countless Americans in need.
In the House of Representatives, Reps. Rosa DeLauro, Suzan DelBene, and Ritchie Torres have reintroduced the American Family Act. This proposal aims to solidify the expansions of the child tax credit under the American Rescue Plan, ensuring that they become a permanent lifeline for our families.
Additionally, a coalition of Senators including Sherrod Brown, Corey Booker, Michael Bennet, Ron Wyden, and Raphael Warnock are expected to bring forth a similar bill known as the Working Families Tax Relief Act (WFTRA). This bill, aligned with our values and needs, also seeks to make the American Rescue Plan's expansion of the Child Tax Credit a permanent fixture in our lives.
If this Child Tax Credit expansion passes, it would significantly benefit our communities. For children aged 6-17 years old, the credit would increase to $3,000, and for children 5 years and younger, it would be raised to $3,600, just as it was during the initial expansion. Importantly, the credit will remain "fully refundable," ensuring that all American families are eligible to receive the complete credit amount. As before, monthly credit payments will be made, providing our families with a reliable source of financial stability during uncertain economic times. This permanent expansion is projected to positively impact 40 million American families and bless the lives of 65 million children.
Other Proposed Expansions to Tax Credits
Moreover, the WFTRA also seeks to bring about substantial expansions to the earned income tax credit, which is designed to uplift families with low and moderate income levels. The proposed expansions would nearly triple the maximum value of the credit available to "childless workers." This expansion aims to widen the age range of individuals eligible for the credit, embracing both younger and older workers. Additionally, the proposal is rooted in our values of compassion and support, aiming to improve accessibility to the credit for adults transitioning out of the foster youth system, offering them increased opportunities to succeed.
The amount of the credit available depends on your income and the number of children you have. You can quickly determine if you qualify by taking the following survey.