In 2021, the pandemic was still raging and causing a world of economic upheaval. Lawmakers acted by passing the Americans Rescue Plan, which included, among other benefits, a round of $1,400 stimulus checks and a major boost to the Child Tax Credit.
The Child Tax Credit currently has a maximum value of $2,000 per child. In 2021, however, its maximum value increased to $3,600 per child under age 6 and $3,000 for children aged 6 to 17. And that amount of tax savings did a world of good for struggling Americans.
Just as importantly, half of the boosted Child Tax Credit was sent in installment payments that hit recipients’ bank accounts during the year. Normally, anyone entitled to a tax credit needs to wait until they submit a tax return to claim it.
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Now, some lawmakers are still pushing to bring the boosted Child Tax Credit back. And given the way poverty rates have risen since the boosted credit expired, there’s a strong case for doing so.
Americans are doing worse on a whole
Between 2021 and 2022, the official poverty rate of 11.5% did not really change, says the U.S. Census Bureau. However, the Supplemental Poverty Measure (SPM) rate was 12.4% in 2022, an increase of 4.6 percentage points from 2021. That was also the first increase in the overall SPM poverty rate since 2010.
What’s more, it’s clear that this increase came as a result of changes to federal tax policy, including the expiration of the enhanced Child Tax Credit. So it’s easy to see why lawmakers are eager to bring the boosted credit back.
However, there’s still debate as to how exactly the credit will work. Some lawmakers, for example, want to implement a work or earnings-related requirement as part of a reintroduced Child Tax Credit. But those opposed to that requirement argue that imposing it would likely take the boosted credit away from the people who need that extra money the most.
What’s next for the Child Tax Credit?
The absence of the boosted Child Tax Credit most likely wasn’t the only factor that impacted poverty rates in 2022. Inflation may have played a role, too.
But all told, it’s clear that Americans’ financial situations took a hit once the boosted Child Tax Credit went away. Bringing it back could not only pull many families out of poverty, but also help shore up the finances of those who are above the poverty line — but barely.
It’s likely that lawmakers will continue to debate the specifics of the boosted version of the credit until they reach a consensus everyone can get on board with. But for the sake of struggling Americans, let’s hope that happens soon.
In the meantime, you should know that the regular Child Tax Credit is still alive and well with a maximum $2,000 value per child. If you have dependents, you should gear up to claim it on your 2024 tax return.
You should also know that there’s another tax credit that could be useful to you if you pay for childcare expenses. It’s called the Child and Dependent Care Credit, and it allows you to deduct a certain portion of your childcare costs, the exact amount of which depends on what you spend and what your income entails.
The Child and Dependent Care Credit also got a boost in 2021. At this point, that boost is unlikely to come back, though. Lawmakers are more focused on fighting for a permanent enhancement to the Child Tax Credit since it has a broader reach.
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