Millions of low-income families who must navigate the high cost of living have good news to celebrate.
The House of Representatives voted this week in favor of a $78 billion fiscal package that includes an expansion of the child tax credit.
What does it consist of, who can apply and how would this benefit be claimed, if the Senate approves it and the president, Joe Biden, ratifies it?
We answer these and more questions.
A Venezuelan mother holds her children in Brownsville, Texas, on May 10, 2023.ANDREW CABALLERO-REYNOLDS / AFP via Getty Images
How does it change regarding the child credit due to the pandemic?
Currently, most families receive $2,000 per child.
But this is not the case for low-income families, since the credit reduces the taxes owed, so many families that do not earn enough cannot take full advantage of the benefit.
One of the new features of this package is that
it will allow low-income families to claim the credit for each child they have,
even if they do not qualify for the full $2,000.
Furthermore, the expansion of credit contemplates annual increases equivalent to the increase in inflation, something that is not present in the current law.
In the current version, the credit is phased in at the same rate depending on income (only middle- and high-income families are eligible for the full $2,000 per child refund), regardless of the number of dependents under age 17. be had.
That is, a married couple earning $12,500 a year is eligible for a $1,500 credit, whether they have one child or three.
Under the extension,
the amount that can be received is multiplied by the number of children,
according to The Washington Post.
That married couple earning $12,500 a year would be eligible for a $3,000 credit if they have two children, $4,500 if they have three, and so on without a limit.
If a family's tax credit is greater than its tax income, the family can receive a portion of the surplus as a tax refund, although not necessarily all of it, according to the cited media.
This figure of what can be received as a tax refund
would increase
from 1,800 dollars in 2023, to 1,900 in 2024 and 2,000 in 2025.
How much is the maximum that can be received?
The maximum tax credit per child is $2,000 for tax year 2023. But it will increase with inflation in 2024 and 2025.
Who benefits?
Low-income families, especially if they have several children.
More than 95% of the new benefits for 2023 would go to
households with children earning up to $40,500 a year
, according to the Urban-Brookings Tax Policy Center.
Families that do not owe income taxes, that is, they do not have a tax debt with the IRS, the Internal Revenue Service.
To qualify for the credit,
children must have a Social Security number
and must be considered dependents.
IRS rules define who is a dependent.
That dependent must be under age 17 and live with the family for at least half the year, among other characteristics that the IRS defines in detail.
You qualify if your annual income exceeds $2,500 annually, but is not more than $200,000 (400,000 if you file a joint return).
How much could I receive?
The amount a family receives depends on their income and the number of children they have.
Higher income means a larger credit, up to $2,000 per child.
If approved, when would it come into effect?
The proposed changes would take effect retroactively for fiscal year 2023.
Refunds would be sent to eligible taxpayers who have already filed their 2023 tax returns, IRS Commissioner Danny Werfel told The Wall Street Journal.
How is it claimed?
If the tax package is approved for the new benefit to take effect in time for the next tax filing season, you don't need to do anything to claim the credit, just file your taxes as usual: by filing a 1040 return and attaching Form 8812. , as explained on the IRS website.
What's next for the bill?
The bill must now go to the Senate, where it must have the support of at least 60 of the 100 senators.
If approved by the Senate, the changes would apply to fiscal years 2023 through 2025. This could lift 400,000 children out of poverty in the first year, and another 3 million children would be less poor, according to a recent Center for Priorities report. Budgetary and Political.
The package has broad bipartisan support, but also faces opposition from both Democrats and Republicans.
Some Republican senators say they worry the payments will discourage families from working.
Others do not agree that the benefit can reach undocumented immigrants if they have children with Social Security numbers.
And some progressives say the proposal doesn't go far enough.