Six weeks to go in the 2024 tax season, and the Senate is still considering a proposed tax bill that would send more money this year to lower-income families with children. The legislation, the Tax Relief for American Families and Workers Act of 2024, has already passed the House and would expand the child tax credit by boosting the maximum refundable amount per child over the next three years.
IRS Commissioner Daniel Werfel said on Feb. 15 that his agency is following closely the status of the bill now with the Senate and is “poised to move quickly to implement” the child tax credit expansion if the bill does become law. Following up on Werfel’s comments, the IRS said on Feb. 21 that if Congress changes the credit guidelines, it will automatically make adjustments for those who’ve already filed so no additional action will be needed by those eligible taxpayers.
The proposed boost to the child tax credit would work differently than the 2021 change, and the Center on Budget and Policy Priorities estimates that 16 million children in low-income families would benefit from the new boosted credit in the first year. The credit boost is part of a larger tax bill that would extend some business credits. We’ll help you find out if you’d be eligible for the child tax credit, and how much money you and your dependent children could get.
For more, here’s when you could expect to receive your child tax credit refund and which states are sending child tax credits in 2024.
What’s the proposed 2024 enhanced child tax credit?
The proposed changes to the $2,000 child tax credit would cover three tax years: 2023, 2024 and 2025. That means you could claim the expanded credit this tax season when you file your 2023 tax returns.
The child tax credit would continue to be partially refundable, meaning that for a part of the credit, you could get a refund even if you didn’t owe any tax. The new rules would increase the maximum refundable amount from $1,600 per child. For the tax year 2023, it would increase to $1,800; for the tax year 2024, to $1,900; and for the tax year 2025, to $2,000. The 2024 and 2025 amounts would be adjusted for inflation.
The remainder of the $2,000 after the refundable amount ($200 for tax year 2023) would be nonrefundable, meaning you could only use the tax credit against taxes you owe — after your tax bill hit zero, you wouldn’t get additional money.
As part of a massive COVID aid package in 2021, Congress temporarily expanded the child tax credit, which helped drive child poverty to a record low.
The 2021 pandemic child tax credit increased the credit amount up to $3,600 per child under age 6 and $3,000 per child ages 6 to 17. The credit was fully refundable, and instead of eligible families receiving the credit in 2022 after filing their taxes, they could receive half of the credit through monthly advance payments in 2021 and then the other half in 2022. Congress didn’t extend the larger credit amount beyond 2022, and the credit returned to its pre-pandemic level.
How quickly could you receive the additional child tax credit money?
In testimony before the House Ways and Means committee on Feb. 15, The IRS’ Werfel said his agency is monitoring the status of the child tax credit expansion as it moves through Congress and said the IRS can move quickly if the bill becomes law.
Building off the agency’s experience with sending three rounds of stimulus checks during the pandemic, Werfel said, the IRS may be able to start implementation “as early as six to 12 weeks after passage, depending on the bill’s final language.” This year’s tax season ends April 15, a little more than seven weeks from now.
Werfel said, however, that “taxpayers should not wait for this legislation to file their returns. We will take care of getting any additional refunds to taxpayers who have already filed. They won’t need to take additional steps,” such as filing an amended return.
How much could I receive with the proposed expansion of the child tax credit?
The new child tax credit plan seeks to get more money into the hands of lower-income families. “Fifteen million kids from low-income families will be better off as a result of this plan,” said Sen. Ron Wyden, a Democrat from Oregon, who helped shape the tax deal. “It’s a big deal to have this opportunity to pass pro-family policy that helps so many kids get ahead.”
Critics of the former child tax credit said it kept money from those children who needed it most. Up to 19 million children in the lowest-income families received less than the full credit because their parents earned too little, the Urban Institute found (PDF).
With the new boosted credit, the maximum refundable amount per child would be $1,800 in the tax year 2023, $1,900 in the tax year 2024, and $2,000 in the tax year 2025, letting lower-income families claim more of the refundable portion of the credit. Under the former tax break, the maximum refundable tax credit available per child was $1,600.
Rules around the new credit would also provide more money to families with multiple children, by taking into account the number of qualifying children when calculating the amount of the credit, said Rep. Jason Smith, a Republican from Missouri, who also helped craft the bill.
For example, the Center on Budget and Policy Priorities estimates that a single parent with two children who earns $13,000 would see their credit double in the first year, for a $1,575 gain.
Would I qualify for the new child tax credit?
The eligibility rules around the new credit would be similar to the existing, non-pandemic child tax credit. To be eligible for the tax break this year, you and your family would need to meet these requirements:
- You have a modified adjusted gross income, or MAGI, of $200,000 or less, or $400,000 or less if you’re filing jointly.
- The child you’re claiming the credit for was under the age of 17 on Dec. 31, 2023.
- The child has a valid Social Security number.
- They’re your legally recognized child, stepchild, foster child, sibling, half-brother or half-sister, or a descendant of one of these categories (like a grandchild or niece or nephew).
- They’ve contributed no more than half their own financial support in the relevant tax year.
- They’ve lived with you for more than half the year.
- You’re claiming them as a dependent on your tax return.
- You’re a US citizen or resident alien.
When would I receive the expanded child tax credit money?
Unlike the 2021 credit, where you could receive half in monthly advance payments, under the new proposed rules, you’d claim the credit when you file your tax return. You’d then receive any child tax credit money you were owed via your tax refund, or use that credit to offset your tax liability if you owed money. The IRS said it handle making adjustments for those who have already filed so they won’t need to file an amended return.
Will the expanded child tax credit become law?
The House passed the child tax credit bill on Jan. 29, but with six weeks left in tax season, Senate approval is uncertain. Senate Majority Leader Chuck Schumer, a Democrat from New York, has said he supports the bill. The White House said President Joe Biden “remains committed to fighting for the full expanded Child Tax Credit.”
For more, here’s how to track the status of your tax refund and why using ChatGPT to help with your taxes is a bad idea.
