The clock is ticking on the child tax credit, which will see its value decrease significantly if it isn’t expanded by 2026, but has the incoming administration of Donald Trump indicated anything about their plans for it?
Vice President Kamala Harris, the 2024 Democratic nominee for president, made the expansion of the credit, especially for families with newborns, a major part of her economic platform, but the future of it now lies in the hands of President-elect Trump’s forthcoming administration and its potential plans for new tax breaks. Trump, as well as his running mate, Sen. JD Vance, have floated similar hopes about expanding the credit, though these ideas have been less concrete than Harris’s, with a recent New York Times report shedding light on the disparity between their views and Harris’s.
Read on to find out what might become of the child tax credit in the near future. For more information on taxes, find out how the IRS is handling payment apps moving forward and what shifting tax brackets might mean for you.
What is the child tax credit?
The child tax credit offers an amount of tax relief to parents for each child under 17 years of age that they claim as a dependent. First introduced in 1997, the credit currently offers $2,000 per child, with only $1,600 of that amount being refundable, which means that you can receive that amount even if you don’t owe that much in taxes. The remaining $400 is nonrefundable, so it can only be used to lower your tax burden.
In 2021, President Joe Biden’s American Rescue Plan was passed and brought with it substantial increases to the child tax credit. Under the law, the credit was expanded to pay out $3,600 per child under 6 years old and $3,000 per child age 6 to 17. The credit was also fully refundable and partially payable as a monthly benefit.
Studies indicate that the 2021 temporary increase of the credit had a significant impact on childhood poverty. Columbia University’s Center on Poverty and Social Policy found that the payments reduced the monthly rates of child poverty by nearly 30%, with payments reaching roughly 61 million children.
What happened to the child tax credit after 2021?
After 2021, Congress didn’t renew the temporary tax break and the child tax credit reverted back to its prior levels, and it is scheduled to drop again after 2025 to $1,000 per child.
Efforts to expand the credit since 2021 haven’t panned out, including a Senate vote on Aug. 1 that failed 48 to 44, with all but three Republicans voting against it.
What have Republicans proposed for the child tax credit?
Vance said in an Aug. 11 interview with CBS News that he would work to make the credit bigger, if such a thing could be worked out with Congress. Trump’s official « Issues » page for his 2024 campaign did not single out the child tax credit, suggesting in only one section lowering taxes in general terms.
« I’d love to see a child tax credit that’s $5,000 per child, » Vance said in the interview. « But you, of course, have to work with Congress to see how possible and viable that is. »
The child tax credit was raised from $1,000 to $2,000 in 2017 when Trump signed into law the Tax Cuts and Jobs Act, which expires in 2025. His 2024 campaign said in a comment to CNBC that Trump « will consider a significant expansion of the child tax credit, » but did not elaborate on his plans. A recent piece on the fate of the child tax credit from the New York Times noted that Trump is keen to boast that during his administration, he « doubled » the credit, however, the piece explained that since Trump’s policy treats the child tax credit more as a tax cut than a credit that anyone can apply for, it was not applicable for the poorest 25 percent of families that made too little to report taxes.
For more information about the history of the credit, check out CNET’s past coverage about eligibility for taxpayers and how it can be affected by shared custody arrangements.
2024-12-17 16:33:00
