What is the Tax Relief for American Families and Workers Act of 2024?
With inflation still increasing and not many families receiving pay raises to cover the cost of living, many parents wonder if a new federal child tax credit may return. The tax relief you may be hearing about is similar to the one from 2021 that helped struggling families across the country, and it might return, maybe, if a new bipartisan proposal comes to life. For many families, this will provide some much-needed financial assistance. Here’s what parents need to know.
The proposal is a joint Democrat and Republican effort (yes, you heard that right) to help lower-income families, but it also includes support for businesses. If it goes into law, it would revive the child tax credit from the 2021 American Rescue Plan Act, according to The Economic Times.
Here are some highlights of the plan, which is called the Tax Relief for American Families and Workers Act of 2024, according to a press release from the U.S. Senate:
- Supports working families with an enhanced child tax credit
- Expands innovation and competitiveness with economic policies like research and development expensing
- Rebuild communities struck by disasters with tax relief
- Enhances the low-income housing tax credit
- Eliminates fraud and waste by ending the Employee Retention Tax Credit program
“American families will benefit from this bipartisan agreement that provides greater tax relief, strengthens Main Street businesses, boosts our competitiveness with China, and creates jobs,” Ways and Means Chairman Jason Smith, (R-MO), said. “We even provide disaster relief and cut red tape for small businesses, while ending a COVID-era program that’s costing taxpayers billions in fraud.”
Psst…check out our article on setting up Financial Goals for Kids: How to Set Them and Why It’s Important
How will it help families?
The proposed tax credit most likely won’t be exactly like the original. But there are elements to the plan that will help lower-income families.
First, the deal would expand access to child tax credit. There would be phased increases to the refundable portion of the child tax credit for 2023, 2024 and 2025. There would be no penalties for larger families (thus ensuring the credit phase-in is applied fairly to families with multiple children).
Under current law, the maximum refundable child tax credit is limited to $1,600 per child for 2023. This proposed deal would increase the maximum refundable amount per child to $1,800 in tax year 2023, $1,900 in tax year 2024, and $2,000 in tax year 2025.
The plan also details that there would be flexibility for taxpayers. They could use either current or prior-year income to calculate the child tax credit in 2024 or 2025.
The credit would also be adjusted for inflation starting in 2024.
“Sixteen million kids from low-income families will be better off as a result of this plan, and given today’s miserable political climate, it’s a big deal to have this opportunity to pass pro-family policy that helps so many kids get ahead,” Senate Finance Committee Chairman Ron Wyden (D-Ore.), said.
It’s not clear right now when—or if—the proposal would go into effect. But Wyden wants to get it passed for this tax filing season, which starts soon on Jan. 29, 2024.
“My goal remains to get this passed in time for families and businesses to benefit in this upcoming tax filing season, and I’m going to pull out all the stops to get that done,” he said.
For more information, visit senate finance website, which provides technical information about the plan.