There are speculations the child tax credit is dropping to $1,000 by the year 2025. For years, the credit has been in effect to provide a monetary value for parents tasked with taking care of their kids — they are the future after all.
Additionally, kids are one of biggest drivers of the economy. It starts with diapers and monthly clothes, but gradually the purchases blossom into the automotive and education sectors. Finally, they become members of the work force. In an effort to support parents, the child tax credit has grown over time. However, recently the tax credit appears to be one of the first to get the axe.
Some Background on the Child Tax Credit
In 2017, the Tax Cuts and Jobs Act passed boosting the $1,000 per child (under the age of 17) to $2,000. In 2021, the American Rescue Plan Act passed to raise the child tax credit for low- and middle-income families. This was largely due to the pandemic. Families could claim up to $3,000 per child under the age of 18 and $3,600 for children under the age of 6.
The pandemic continues to be a challenge. And, as many of us have experienced first-hand, parents have struggled immensely. With offices and schools closed, few options remained for keeping kids engaged (let alone distracted). The pandemic relief funds helped many find options for their kids to have daycare or a computer for school.
However, the Tax Cuts and Jobs Act is only valid through 2025. After that, the Act needs to either be renewed or the child tax credit returns to $1,000.
$1,000 per Kid after 2025
To be fair, this is far from “official.” Many laws like this operate on cycles and the Tax Cuts and Jobs Act is no different. In the same way elections take place every year and public office is not automatically a “career” but dependent on votes, so too are some laws.
However, a proposal has been set forth wherein, as soon as 2023, the child tax credit could be reduced. This is partially to ensure the social and climate plan has enough funds. Additionally, as a positive, this would make the credit fully refundable. All this said, nothing is certain yet.
The current plan would remove the credit for high-income earners and those making more than $75,000/year (or $150,000 if married). This would help low-income earners take advantage of the tax credit.
In conclusion, the child tax credit is in flux. It will either change as early as 2023 or as late as 2026, and it’s especially important for parents. If renewed, then the credit continues; if not, the credit will revert to it’s 2016 amount ($1,000 per child).
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