Child Tax Credit May Reduce From the Beginning of 2022. Here’s Why?
If the U.S. Senate democrats fail to intervene in President Joe Biden’s bid to get approval for his Build Back Better plan, the monthly child tax credit will be slashed to the rates before it was bumped up early this year.
The American Rescue Plan, a pandemic-relief law, raised the credit’s maximum value to $3,000 or $3,600 per child (depending on their age), from $2,000, in 2021. It also converted the tax break into a monthly income stream families started getting in July.
The child tax credit may reduce to $2000 dollars next year if Biden’s request continues to meet a brick wall. It could fall further to $1000 per due to “sunset” provisions in a 2017 tax law passed by the Republican-controlled Congress.
It is not likely that Congress would allow the rate to fall to $1000.
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“There’s a long history of the child tax credit being expanded temporarily, and when the deadline hits it gets extended again,” Elaine Maag, a principal research associate at the Urban-Brookings Tax Policy Center, has told CNBC.
Maag said that if the current law expires, low-income households will be the first to feel the heat while middle and high earners will see little to no impact.
“It would also make the credit fully refundable on a permanent basis — a particular benefit for low earners, who would get the full value of the credit regardless of their income or tax liability. Prior to the pandemic relief law, this wasn’t the case, and nearly all the credit’s benefits went to middle-earning households,” Maag said.