If you’re a parent, you’ve probably been keeping an eye on the news about the Tax Relief for American Families and Workers Act of 2024. The bill includes new provisions for the Child Tax Credit that will result in more money for millions of families. The US House voted in favor of the bill earlier this month, and now, a vote in the Senate is the only thing standing between many stressed families and a much-needed tax break.
It may be tempting to hold off on filing taxes until Congress moves forward, but even if changes are coming, you shouldn’t wait, according to tax experts we spoke with. 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 include the pending legislation on your 2023 taxes.
What is the Child Tax Credit, and how is it changing?
The proposed Child Tax Credit legislation would make the credit more refundable and take inflation into account during tax years 2023 through 2025. Currently, the Child Tax Credit offers qualifying families a tax break of up to $2,000 per child, with up to $1,600 available as a tax refund. Under the expansion, the amount families will receive as a refund will increase to:
- $1,800 per child by 2023.
- $1,900 per child by 2024.
- $2,000 per child by 2025.
Expanded credit will also make it easier for low-income families to access savings. Most families earning less than $21,000 would see a tax cut under the new law, 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 the Senate, it will need at least 60 votes. However, there is currently no official timeline for when the Senate might be ready to move forward with legislation.
Should parents wait to file taxes?
No matter what Congress does, no one should have to 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 are ready,” he advised. “Don’t wait until Congress makes changes.”
“I encourage parents and all taxpayers to file their taxes as soon as they are 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 said, the pending legislation may not pass. NBC News reports that some Republican senators are still undecided on whether they will vote for the expansion. Additionally, the busy agenda for the congressional term means it could be weeks or even months before legislation is addressed. The deadline to file taxes is April 15, 2024.
Importantly, if the legislation passes, there are plans to re-apply the expanded Child Tax Credit to qualified recipients. “The IRS said they will make the change and send updates to taxpayers whether or not they have an additional refund,” Farrington said. “No further steps 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 within several weeks” — six to 12 weeks more — if Congress passes the legislation.
Why is Congress considering a new Child Tax Credit?
The expanded child tax credit could help many families deal with rising living costs and rising child care costs. The consumer price index rose 0.3% in January, the US Bureau of Labor Statistics reports. This means American families face higher costs for basic necessities, including shelter and food. Tax relief is one way to help ease the burden.
“Expanding refundable tax credits is a step in building US policies to really help children.”
— Elizabeth Palley, professor, Adelphi University School of Social Work
In its first year, the Child Tax Credit proposal will raise up to 400,000 children above the poverty line, according to a report by The Center On Budget And Policy Proposals. By 2025, when the measure takes full effect, the number of children helped will reach more than half a million.
“Expanding refundable tax credits is a step in building policies in the US to really help children,” said Elizabeth Palley, a professor and director of the doctoral program at Adelphi University’s School of Social Work in Garden City, New York. “If families were eligible to receive $1,800 (up to $2,000 by 2025) instead of the current $1,600, this could make a real difference for some low-income families.”
The bottom line
Many American families may see increased tax refunds from the Tax Relief for American Families and Workers Act of 2024, but that doesn’t mean parents should wait for Congress to act before filing their taxes.
Financial 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 out on any important deductions. If and when the legislation passes, the IRS will make sure families get the money they deserve. And, as a bonus, you’ll have the comfort of knowing that the stress of tax season is behind you.
