HomePersonal FinanceChild Tax Credit Will Soon Reduce to $1,000 from $3,600!

Child Tax Credit Will Soon Reduce to $1,000 from $3,600!

Even if the most recent version of the $1.75 trillion social and environmental plan passes, the child tax credit will likely be reduced significantly by mid-decade, according to experts. If Congress does not act, the value of the tax break for parents would plummet by more than two-thirds relative to the present law in 2026, dropping to $1,000 per child.

Because of two key provisions in two pieces of legislation passed by the Republican-controlled Congress and the current Democratic majority, this potential is now feasible: a 2017 tax law approved by the GOP-dominated legislature, as well as an American Rescue Plan, put forth in March by the present Democratic leadership.

The Child Tax Credit was increased from $1,000 to $2,000 per kid under 17 years old in 2017. The American Rescue Plan raised it even more for low- and middle-income parents: up to $3,000 per kid under 18, and $3,600 for children under 6.

The American Rescue Plan Act, a pandemic preparedness bill, only increased the expected revenue for 2021. The 2017 Tax Cuts and Jobs Act raised it to 2025.

The Tax Cuts and Jobs Act increased the tax credit from $2,000 to $4,000 for many people. Because of this increase, the value would fall below that established by the Tax Cuts and Jobs Act. However, Congress is unlikely to let the tax credit return to its previous level of $1,000.)

Read More: 36 Million US Families Set To Receive Stimulus Payments Today. Are You Eligible?

Low-income families

Because other portions of the tax code would revert to pre-Tax Cuts and Jobs Act status for low-income families after 2025, some low-income households might be worse off. That’s because other provisions in the legislation would revert to earlier conditions for individuals after 2025.

Furthermore, the personal exemption would return, which is most significant. While the child tax credit’s value decreases, the personal exemption would likewise return. The provision allows taxpayers to exempt $4,050 in income (for themselves and each of their dependents) from taxation.

However, people making less than $100,000 per year (who may not be able to offset their tax liability) will not see much financial benefit.

Read More: Qualified Individuals With Low-Income Households are Set to Receive $1,000 Cash Payments

The proposed legislation, which may change, would keep the child tax credit’s present value for 2022. It would also continue to pay out the credit as a monthly income stream to parents with incomes below $75,000 (single) or $150,000 (married).

However, it would also bring another one of the American Rescue Plan’s primary modifications: making credit completely refundable.

Hikaru Y.https://theeastcountygazette.com
Hikaru is the lead editor at The East County Gazette. He covers news in & out of Sand Diego & the rest of California State.
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1 COMMENT

  1. We are still waiting for all of our CTC payments. Can’t get no answers from the IRS and we filed our taxes back in Feb of 2021 and we are eligible.

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