Families Face Uncertainty as Child Tax Credit Hangs in the Balance
As the new administration takes office, millions of families are left wondering about the future of the child tax credit, a vital provision that has provided financial relief to many. The Tax Cuts and Jobs Act of 2017, signed into law by President Trump, temporarily increased the maximum child tax credit to $2,000 per child under 17 and expanded eligibility to higher-income families. However, this increased benefit is set to expire in 2025, leaving families to face a potential cut in half.
The Impact on Low-Income Families
The current design of the child tax credit has been criticized for favoring higher-income families over lower-income ones. The refundable portion of the credit, which reduces the benefit for families without taxes due, was capped under the TCJA. As a result, an estimated 17 million children under 17 from lower-income families will not receive the full value of the credit in 2025.
Bipartisan Support for Expansion
Despite concerns about the federal budget deficit, there is growing support from both Democrats and Republicans to extend the expiring child tax credit. In January 2024, House lawmakers passed a bipartisan tax package that included a child tax credit expansion, aiming to increase access and retroactively boost the refundable portion for 2023. While Senate Republicans blocked the legislation in August, they expressed interest in future negotiations.
Competing Priorities and Budget Deficit Concerns
With trillions of dollars in competing priorities and a growing budget deficit, it remains unclear whether lawmakers will extend the boosted child tax credit. The three-month fiscal year 2025 deficit has ballooned to $710.9 billion, nearly 40% above the same period last year. As lawmakers weigh their options, families are left to wonder about the future of this vital tax provision.
What’s at Stake
The child tax credit is a critical component of many families’ financial plans. If the increased benefit is allowed to expire, millions of families could face a significant reduction in their tax refund. As lawmakers navigate the complex landscape of tax policy, they must consider the impact on families who rely on this credit to make ends meet.
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