If you’re a parent, you’ve likely been keeping tabs on news regarding the Tax Relief for American Families and Workers Act of 2024. The bill includes new provisions for the Child Tax Credit that would result in more money for millions of families. The U.S. House voted in favor of the bill earlier this month, and now, a Senate vote is the only thing standing between many stressed out families and a much-needed tax break.
It might be tempting to hold off on filing taxes until Congress moves forward, but even though changes may be coming, you should not wait, according to the tax experts we spoke to. Here’s what to know about the proposed changes to the Child Tax Credit, when you can expect Congress to act and how experts say you should factor the pending legislation into your 2023 taxes.
What is the Child Tax Credit, and how is it changing?
The proposed Child Tax Credit legislation would make more of the credit refundable and account for inflation during tax years 2023 through 2025. Currently, the Child Tax Credit offers eligible families a tax break of up to $2,000 per child, with as much as $1,600 available as a tax refund. Under the expansion, the amount families can receive as a refund would increase to:
- $1,800 per child in 2023.
- $1,900 per child in 2024.
- $2,000 per child in 2025.
The expanded credit would also make it easier for low-income families to access the savings. A majority of families earning less than $21,000 would see a tax cut under the new legislation, according to the Urban-Brookings Tax Policy Center. On average, the Center reports that households eligible for the tax credit could see a tax cut of $680 in 2023.
The Tax Relief for American Families and Workers Act of 2024 passed the House by a vote of 357 to 70 on February 1, 2024. To pass in the Senate, it would need at least 60 votes. However, there’s currently no official timeline for when the Senate might be ready to move forward on the legislation.
Should parents wait to file taxes?
Regardless of what Congress does, no one should wait to file their taxes, says Robert Farrington, a personal finance expert and founder of The College Investor. “I encourage parents and all taxpayers to file their taxes as soon as they’re ready,” he advises. “Don’t wait until Congress makes changes.”
“I encourage parents and all taxpayers to file their taxes as soon as they’re ready. Don’t wait until Congress makes changes.”
— Robert Farrington, personal finance expert
There are many reasons why tax professionals caution against waiting. First, Farrington says, the pending legislation may not pass. NBC News reports that several Republican senators are still undecided on whether they’ll vote for the expansion. Additionally, the already busy agenda for the congressional term means it could be weeks or even months before the legislation is addressed. The deadline to file taxes is April 15, 2024.
Importantly, if the legislation does end up passing, there’s already a plan to retroactively apply the expanded Child Tax Credit to eligible recipients. “The IRS has said that they will make the change and send updates to taxpayers whether or not they have an additional refund,” Farrington says. “No additional steps will need to be taken.”
A press release from House Ways and Means Republicans confirms that “adjustments to the Child Tax credit and any additional refunds owed to working families under the Tax Relief for American Families and Workers Act will be processed and issued in a matter of weeks” — six to 12 weeks at most — if Congress passes the legislation.
Why is Congress considering a new Child Tax Credit?
An expanded child tax credit could help a number of families deal with increased costs of living and rising child care costs. The consumer price index increased 0.3% in January, the U.S. Bureau of Labor Statistics reports. This means American families are facing higher costs for basic necessities, including shelter and food. Tax relief is one way to help ease the burden.
“Expanding refundable tax credits is one step in developing policies in the U.S. to really help children.”
— Elizabeth Palley, professor, Adelphi University School of Social Work
In its first year, the Child Tax Credit proposal would lift as many as 400,000 children above the poverty line, according to a report by The Center On Budget And Policy Proposals. By 2025, when the proposal is in full effect, the number of kids helped would total more than half a million.
“Expanding refundable tax credits is one step in developing policies in the U.S. to really help children,” says Elizabeth Palley, a professor and the director of the doctoral program at Adelphi University’s School of Social Work in Garden City, New York. “If families are eligible to receive $1,800 (up to $2,000 by 2025) instead of the current $1,600, this can make a real difference for some low-income families.”
The bottom line
Many American families could see increased tax refunds from the Tax Relief for American Families and Workers Act of 2024, but that doesn’t mean parents should wait on Congress to act before filing their taxes.
Finance experts advise that you file your taxes as soon as possible, regardless of eligibility for the Child Tax Credit. In the meantime, working with a tax service can make the process easier and ensure you don’t miss any vital deductions. If and when the legislation passes, the IRS will ensure families get the money they deserve. And, as a bonus, you’ll have the relief of knowing that the stress of tax season is already behind you.