A demonstration hosted by the ParentsTogether Foundation in support of the Child Tax Credit portion of the Build Back Better Bill outside of the US Capitol on December 13, 2021.
Sarah Silbiger / Bloomberg a través de Getty Images
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The enhanced child tax credit may expire in 2022, resulting in less of a financial benefit for parents. But that cut may not be the last: The value of credit is set to fall even further within a few years.
Democrats are still trying to muster 50 votes in the Senate for President Joe Biden’s social policy and climate agenda, which would extend a temporary increase to the child tax credit for another year.
The American Rescue Plan, a pandemic relief law, raised the maximum value of the credit to $ 3,000 or $ 3,600 per child (depending on age), from $ 2,000, in 2021. It also made the tax exemption a monthly income stream that families began to enter. July.
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The credit will return to its value of $ 2,000 next year if Congress does not intervene. It’s about to fall further after 2026, when the tax exemption would be lowered to $ 1,000 per child due to “sunset” provisions in a 2017 tax law passed by the then Republican-controlled Congress.
Of course, Congress will not necessarily allow the tax credit to go back to that $ 1,000 value.
“There is a long history of temporary expansion of the child tax credit, and when the deadline comes, it is extended again,” Elaine Maag, senior associate researcher at the Center for Tax Policy at Urban-Brookings, told CNBC.
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If the existing law expires, low-income households would suffer the brunt of the impact, while middle- and high-income households would generally see little or no impact, said Maag, who specializes in income support programs for families of low income.
The Build Back Better Act, which House Democrats passed in November, would expand the monthly income stream from the tax credit for parents whose income is less than $ 75,000 (single) or $ 150,000 (married) annually.
It would also make the credit permanently fully refundable, a particular benefit for low-income people, who would get the full value of the credit regardless of their income or tax liabilities. Before the pandemic relief law, this was not the case, and almost all the benefits from the credit went to middle-income households, Maag said. (People with higher incomes were not eligible.)
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Democrats had I expected to send legislation to Biden’s desk before the end of the year. The bill has stalled in the Senate, where Joe Manchin, a conservative Democrat from West Virginia, continues to resist the $ 1.75 trillion bill. The party needs 50 Democratic votes in the Senate because of the unified Republican opposition.
An earlier version of the Democrats’ legislation, originally set at $ 3.5 trillion, would have extended the value of the improved child tax credit through 2025 instead of 2022. The party lowered the measure after Manchin’s cost objections. and Senator Kyrsten Sinema, D-Arizona.
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