Full Briefing: Tax Relief for American Families and Workers Act of 2024
The Tax Relief for American Families and Workers Act of 2024 proposes several changes that aim to provide relief to American families and workers. One significant change is the expansion of the child tax credit. Currently, the child tax credit is set at $2,000 per child for taxpayers who do not exceed a certain threshold of earned income.
Under the proposed law, a portion of this $2,000 can be applied as a refundable credit, with a maximum amount of $1,600 for 2023. For taxpayers with one or two children, the refundable portion is limited to the lesser of the balance of the child tax credit amount or 15% of the amount by which the taxpayer’s earned income exceeds $2,500. For taxpayers with three or more children, the refundable portion is limited to the lesser of the balance of the child tax credit amount or the greater of the excess of the taxpayer’s Social Security taxes over the earned income credit or 15% of the taxpayer’s earned income in excess of $2,500.
The proposed law also introduces a per-child basis calculation for the refundable amount, meaning that the earned income amount exceeding $2,500 will be multiplied by 15% and then multiplied by the total number of children, resulting in the total refundable amount. These changes will apply to the 2023, 2024, and 2025 tax years.
Furthermore, the maximum amount of the refundable credit will be increased for three tax years, without relying on inflation-adjusted increases. The amounts will be $1,800 for 2023, $1,900 for 2024, and $2,000 for 2025. Additionally, the maximum amount of the overall child tax credit will be adjusted for inflation for the 2024 and 2025 tax years.
It’s important to note that these temporary changes are similar to some changes implemented for the 2021 tax year by the American Rescue Plan Act of 2021. The previous bill made the credit fully refundable and increased the total credit to $2,500 per child. However, one provision that isn’t carried over from the previous bill is the provision allowing for the credit to be paid in advance on a monthly basis. With the proposed change, taxpayers will still need to wait until they file their return to claim the benefit.
The Tax Relief for American Families and Workers Act of 2024 also allows taxpayers to elect, in 2024 and 2025, to use earned income from the prior taxable year in calculating the credit if their earned income in the current year is less than their earned income in the previous year. This provision specifically impacts claims for the refundable child tax credit.
FAQs
Q: Are these proposed changes similar to the ones introduced in the American Rescue Plan Act of 2021?
A: Yes, these temporary changes are similar to the changes implemented for the 2021 tax year. The previous bill made the credit fully refundable and increased the total credit to $2,500 per child. However, the provision allowing for monthly advance payments of the credit is not carried over in the proposed changes.
Q: Can taxpayers use earned income from the prior taxable year to calculate the credit if their current year’s earned income is lower?
A: Yes, taxpayers can elect, in 2024 and 2025, to use their earned income from the previous taxable year if their current year’s earned income is lower. This provision specifically affects claims for the refundable child tax credit.
Conclusion
The Tax Relief for American Families and Workers Act of 2024 introduces significant changes to the child tax credit, aiming to provide relief to American families. These changes include an expanded refundable portion, a per-child basis calculation, and increased maximum amounts for the credit. While similar to the changes implemented in 2021, the proposed law does not include the provision for advance monthly payments of the credit. Taxpayers will still need to wait until they file their return to claim the benefit. Ultimately, these changes seek to alleviate financial burdens and support families and workers across the United States.
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