The Child Tax Credit extension might happen, but it comes with some serious drawbacks. Instead of the $3,000 per child under 18 years old and $3,600 per child under age 6, the CTC payments might drop to $1000 per child after 2025. However, this legislation aims to make the credit fully refundable permanently.
Many families benefited from the Child Tax Credit, which has been giving families $250 to $300 recurring payments per child since July. The last of the payments is scheduled to come out on December 15. Afterward, families have to complete their 2021 tax returns to receive the remaining CTC budget.
According to CNBC, the big budget was made possible by two laws. First is the 2017 tax law passed by the Republican-controlled Congress, which secures approximately $2,000 of the payments. Second is the American Rescue Plan passed last March, which improved and delivered the payments. Unfortunately, both laws are only temporary.
Child Tax Credit Extension: New Budget Plan
Elaine Maag, a principal research associate at the Urban-Brookings Tax Policy Center, said, "there's a long history of the child tax credit being expanded temporarily, and when the deadline hits, it gets extended again," per CNBC. Maag explained that as the cycle repeats, a few changes might happen to the incoming CTC payments.
Since the two laws the boosted Child Tax Credit payments are set to expire, the overall budget might get a massive cut. The personal exemption would also come back, adding a few expenses on top of the incoming taxes.
Notably, the low-income households would suffer the most from this development. Some of the low earners, who have too little income that offset the tax, might feel frustrated losing one of their primary resource for child expenses. But Maag pointed out a few benefits that might justify the change.
If lawmakers have their way, the American Rescue Plan's version of Child Tax Credits will be fully refundable.
$1000 CTC Payments After 2025 Fully Refundable
According to Insider, fully refundable means that eligible families will receive the complete payment regardless of their ongoing taxes. This assures families that the much-needed money will be delivered in full to their accounts. Ideally, a fully refundable policy can help reduce the overall population of children living in poverty. Note, however, that this legislation is yet to be approved.
CNBC said that the house aims to pass the legislation, the Build Back Better Act, sometime this week. It would eventually need the approval of the Senate.
It is worth noting that the original legislation drafted $3.5 trillion, which got reduced to $1.75 trillion. However, the change also proposed a monthly payment structure extending until 2025 instead of the 2022 deadline.
The situation is still progressing, and the Child Tax Credit policy extending until 2025 is yet to be approved. For now, families are recommended to settle with the ongoing CTC payments and wait patiently for the update on its future developments.
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