The US federal government and 12 different states are providing Child Tax Credits to help families with children feel more financially secure.
Their scheme is believed to be helping nearly two million kids escape poverty each year, with the number of dependent children, marital status and income level being the main factors that affect the tax credit amount.
When did Child Tax Credits start?
The federal Child Tax Credit has historically enjoyed bipartisan support. It was established as part of the Taxpayer Relief Act of 1997.
Initially, the tax credit was 400 dollars per child under the age of 17 and was non-refundable for the majority of families.
Following the Tax Cuts and Jobs Act of 2017, it was raised to 2,000 dollars, with the US government setting a 1,400 dollars cap on the amount that could be refunded for each kid. Additionally, it introduced phase-out rates and criteria for higher-income taxpayers.
Will Child Tax Credits be extended to 2025?
The Child Tax Credit was temporarily increased by the American Rescue Plan Act of 2021 (ARPA) for the tax year 2021, from 2,000 dollars to 3,600 dollars per kid under the age of six and 3,000 dollars per child up to the age of 17.
For single filers making more than 75,000 dollars per year and married couples making more than 150,000 dollars annually, the size of the enhanced benefit gradually decreased.
For the first six months, rather than paying the entire tax credit all at once, the ARPA made it temporarily completely refundable and distributed half of it as monthly payments.
According to the government’s official website, over 61 million children in over 36 million households may have benefited from the enhanced child tax credit, with the majority of funds going toward child care, food, housing, and other essentials.
However, this was a temporary measure and the advance payment of Child Tax Credit was halted once the coronavirus pandemic started to ease.
It should be noted that the individual tax and estate tax provisions of the Tax Cuts and Jobs Act will expire in 2025.