Will The Child Tax Credit Be Extended To 2025?

Although there were discussions about extending the Child Tax Credit beyond its current provisions, no such extension was enacted for the 2024 tax year. As families prepare to file their 2024 taxes in 2025, it’s crucial to understand that the previously expanded credit amounts do not apply. Will The Child Tax Credit Be Extended To 2025? Let us explore further!

Will the Child Tax Credit Be Extended to 2025?

Yes, there’s a possibility! The proposal on the table suggests an extension of the CTC through 2025. However, it’s essential to know that there is a probability that the credit might decrease in 2026, alongside other expiring parts of the Tax Cuts and Jobs Act. 

Congress is working on a plan to send more money to lower-income families with children this year. The Tax Relief for American Families and Workers Act of 2024 proposes to expand the child tax credit by increasing the maximum refundable amount per child over the next three years.

How is the Expanded Child Tax Credit Different?

Expanding the Child Tax Credit would primarily benefit lower-income families, particularly those with more children. The credit amount received by a family depends on its income. The credit gradually increases for families with lower incomes. Higher incomes result in more credit, up to $2,000 per child.

In the current version, the child tax credit increases incrementally for lower-income families regardless of the number of children. For instance, a married couple earning $12,500 annually qualifies for a credit of $1,500, whether they have one child or three.

With the expansion, the maximum credit amount for lower-income families is multiplied by the number of children in the household. For example, if a married couple earning $12,500 a year has one child, they would be eligible for a $1,500 credit. However, if they have two children, they can receive $3,000, and so on.

What Else Would Change With the Child Tax Credit?

Apart from the extension and expansion, there’s another change in the pipeline. Millions of families could benefit from an annual adjustment for inflation in 2024 and 2025. For example, if inflation is at 5% for one of those tax years, the CTC would be adjusted by adding $100.

Who Gets the Child Tax Credit?

Now, let’s understand who qualifies for the Child Tax Credit. According to the IRS, children under 17 with a Social Security number are eligible by the end of the year. Parents can claim the CTC for each qualifying child if they have lived with them for more than half the year, and it can be claimed on their tax return as a dependent.

It’s not just limited to parents; foster parents and relatives like grandparents or stepparents can also claim the credit if the child meets the IRS’ eligibility requirements.

The Center on Budget and Policy Priorities estimates that expanding the CTC could benefit 16 million children from poor households in the first year, including almost 500,000 children from families of U.S. veterans and active-duty service members.

Income Limits for the Child Tax Credit

Besides meeting eligibility requirements, there are income limits to consider. High-income households may have limitations on the amount they can claim from the CTC.

The total credit is available to single filers with adjusted gross incomes below $200,000 and joint filers with less than $400,000. Beyond these thresholds, the CTC amount decreases by $50 for every $1,000 above the limit.

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When Will the Senate Vote on the Child Tax Credit?

A package to boost the child tax credit and restore some business tax incentives failed to proceed in the Senate on 2 Aug, 2024, with Republicans mainly opposing it, believing that they would be able to obtain a better deal next year.

For How Many Children Can You Claim?

There is no limit on the number of eligible children for the claim. To qualify, children must be claimed as dependents and should have lived with you for at least half the year, meeting additional conditions outlined by the IRS.

What Do I Need To Do To Claim the Expanded Child Tax Credit?

To file the claim these are the tips you need to follow:

• Check if you qualify based on the rules.
• Ensure you have the necessary documents when filing your taxes.
• Keep track of any changes in the law that might affect your eligibility.
• Stay informed and follow the instructions carefully when claiming the credit to ensure you receive the maximum benefit.

Conclusion

In conclusion, despite discussions regarding extending and expanding the Child Tax Credit, no modifications were made for the 2024 tax year. The Child Tax Credit continues at pre-2021 levels. Proposals were explored, but they did not become legislation.

Families should be advised that the expanded credit levels are not available for taxes filed in 2025. Individuals should visit the IRS website (irs.gov) for the most up-to-date information on the Child Tax Credit and other applicable tax advantages.

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