In 2021, the Child Tax Credit was given a major boost at a time when the U.S. was deep in the throes of a pandemic-spurred crisis. Not only did the credit’s maximum value increase from $2,000 to up to $3,600, but the credit became fully refundable, which meant someone who owed nothing on their taxes could still receive its full value.
In 2022, the Child Tax Credit reverted to its former setup, so to speak. The maximum value of the credit was restored to $2,000 per child, and only a portion of the credit remained refundable.
Such is still the case today. But lawmakers have been trying to expand the Child Tax Credit. And this week, the House voted to pass a $78 billion bipartisan tax package that would do just that.
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That’s potentially good news for struggling families. But there are still some hurdles to deal with before an improved Child Tax Credit becomes official.
Some lawmakers are pushing back
For the aforementioned tax package to become official, it needs to get through the Senate. And so far, that bill is facing obstacles.
Some senators are criticizing the process in which the bill is being pushed through and are seeking for it to go through committee rather than be taken up on the Senate floor. But going that route could delay the bill, and that’s a problem.
See, part of the bill has the Child Tax Credit becoming refundable for $1,800 for the 2023 tax year. As of now, only $1,600 is refundable for 2023.
But now is when people are starting to file their 2023 taxes. So if this change is going to take effect, it would be better for it to take effect before people file their returns so they can do so accurately. If lawmakers sit on this bill for too long, implementation could prove to be a nightmare.
For example, let’s say the change becomes official in May. That’s past the April 15 tax-filing deadline. The IRS could, in that situation, make automatic amendments to the many tax returns it has on file that include the Child Tax Credit. But things have the potential to go awry in that situation.
Also, if the Child Tax Credit is expanded after the IRS issues refunds, it’s apt to leave filers short on the funds they’re entitled to. Again, just as the IRS could go in and automatically amend tax returns, so too could it automatically issue “catch-up refunds” as necessary. But an even better thing would be to have all changes take effect early on in the tax-filing season, before returns are processed and refunds start hitting bank accounts.
Make sure to claim the Child Tax Credit if you’re able to
Whether the Child Tax Credit gets a boost or not, if you’re eligible for it on your 2023 taxes, make sure to claim it. You can claim up to a $2,000 credit per dependent under age 17. There are income limits associated with the credit as follows: $200,000 for single tax filers and $400,000 for married couples filing jointly. From there, the credit begins to phase out.
If you’re not sure whether you’re eligible for the credit, it could pay to consult a tax professional. In fact, it can be a good idea to use a professional to file your tax return for you even if you think it’s a fairly simple one. The fee you pay for tax help could be worth it if a professional finds additional tax benefits you never would have thought to claim yourself.
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