Child Tax Credit Changes 2024 – How is Child Tax Credit Going to Change in USA?

The child tax credit has been modified in a temporary sense many times in recent years. On 16th January, Ron Wyden who is the Senate Finance Committee Chair, and House Ways as well as Means Chair Jason Smith announced that they have reached a position for dealing with the agenda which includes any other changes to the Child Tax Credit.

Child Tax Credit Changes 2024

For this proposal, a legislative text was launched on the 17th and a mark-up in Means as well as Ways Committee arose on the 19th January as this time the bill was amended. Further on this date the bill was even voted out as favourable by a vote of 40-3. This type of insight has provided background to many discussions. This is done by summarizing previous changes in legislation for the credit and thus outlining the changes which are proposed to the Child Tax Credit in H.R. 7024.

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Child Tax Credit 2024 Changes: Overview 

Title Child Tax Credit Changes 2024
Country United State of America 
Category Finance
Responsible authority Internal Revenue Service 

Changes in Child Tax Credit recent legislative

Under this permanent law, the Child Tax Credit allows those households that are eligible to decrease their income tax liability by almost $1000 for each child who is aged 16 or less. Those taxpayers who have low income are eligible to get part or all kinds of such benefits as the portion of credit which is refundable which is also known as the Additional Child Tax Credit or ACTC. The Additional Child Tax Credit is the phase in which the income is earned if the household has earnings of USD 3000. For those households that have income which is higher, the Child Tax Credit phases out.

This law is most commonly known as the Tax Cuts and Job Act or TCJA; P.L. 115-97. This law has made several changes that are temporary to the permanent credit which are in effect through the year 2025. The maximum amount of credit has been increased by TCJA up to USD 200 for every child. It has even made modifications to the formula of ACtc for being phasing at USD 2500 of the income which is earned as compared to $3000. Furthermore, it has even capped the portion of the credit that is refundable at $1400 for each child and has increased the level of income by which the credit starts to phase out.

Child Tax Credit Changes 2024 - How is Child Tax Credit Going to Change in USA?

American Rescue Plan Child Tax Credit 2024

According to the American Rescue Plan Act for the year 2021, the additional; temporary changes were layered on the top of TCJA changes for the year 2021. ARPA has even increased the credit amount to $300 for every child and $3600 for every young child. It has e; eliminated the rate of phase-in for those taxpayers who have low income which made them eligible for receiving the maximum or whole amount irrespective of the amount that is earned.

This therefore expanded the age of eligibility for the children which include those who are 17 years old. All these changes expired at the end of the year 2021. Apart from TCJA change to maximum Additional the Child Tax Credit, no parameters of this credit were adjusted for the inflation period.

What are the Plans in 118th Congress

 Several policy managers remained interested in the expansion of credit mainly for benefiting lower and moderate-income households. There hence benefited several from the changes in ARPA. several proposals have also been generated for modifying the Child Tax Credit in the 118th Congress. These proposals would even replace a version that was modified for the changes in ARPA. For example, S. 1992, H.R. 5953, H.R. 3899.

Several makers of policies have even expressed concerns about extending the changes in ARPA which could discourage several recipients from their work. Under the changes of TCJA and permanent law, this phase of credit is in which income is earned for households with lower income. This therefore requires a single parent who have a lower income in order to work or any single parent from a married couple who has a low income to work. The credit of ARPA on the other hand had no requirement of work as the credit here did not phase in with income that is earned.

Child Tax Credit 2024 Expected Changes

Many research which were conducted during the previous pandemic did not find that the child credit of ARPA has discouraged individuals from working even though the findings here are very complicated by the economic problems that were complicated and are associated with the pandemic COVID-19. Several estimates of the impact of credit of ARPA on employment if the credit period is required to be extended for a longer period or is required to be made permanent for predicting an impact that is relatively modest on employment.

Concerns related to the effect of employment of an ARPA credit may be persuaded by several makers of policy to focus on expansion of the credit that exists for the households that have lower income and retaining a phase-in which is reflected in H.R 7024.

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Child Tax Credit 2024 H.R.7024

Several provisions are included in H.R. 7024 which would expand the Child Tax Credit for households with lower income:

  • The ACTC will be calculated for every child: once the amount of Additional Child Tax Credit is been calculated under the current law this would then be multiplied by the child number. This amount would then become subject to the limit of the Additional Child Tax Credit. Such provision would lead to phase-in effectively faster for households with more numbers of children.
  • The amount of maximum additional Child Tax Credit would rise: the Additional Child Tax Credit would rise from $1600 to $1800 for each child in the year 2023 as well as from $1700 to $1900 for each child in the year 2024 and thus will be qua; t $2000 in the year 2025.
  • The use of Prior year income earned by the taxpayers for calculating the ACTC: the ACTC will be calculated by the taxpayers using their income earned in the previous year if the income earned in the current year is less than the previous year
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