In March 2021, American Rescue Plan was amended by lawmakers, this is a massive spending bill that was developed to provide aid during the pandemic. The bill allowed a third round of stimulus checks worth up to $1,400, and it also boosted the Child Tax Credit in a big way.
In 2021, the Child Tax Credit had a maximum value of $2,000 per child, and only a portion of that was refundable. A tax credit is a dollar-for-dollar reduction of your tax liability. So if you owe the IRS $1,000 and can claim a $1,000 tax credit, you reduce your tax bill down to $0.
On the other hand, some tax credits are not refundable, they won’t pay you anything if you don’t owe the IRS money. In addition, half of the Child Tax Credit was paid in monthly installments that hit recipients’ bank accounts from July through December. Usually, the Child Tax Credit is paid as a single lump sum, and recipients have to wait to file a tax return to get it.
Legislators were striving to maintain the boosted Child Tax Credit in place for 2022 so they could continue those monthly payments. And given the way the inflation rate has streamed this year, that would’ve been a good thing for cash-strapped families with topped credit cards.
Unfortunately, the enhanced version of the Child Tax Credit did not get authorized for 2022. Nevertheless, lawmakers are still keeping it on their side, and some are fighting to bring it back.
The urge to bring back the Boosted Child Tax Credit
The enhanced Child Tax Credit benefited numerous families to support their finances, and it also led to a significant decrease in food shortage and child poverty rates. Once the boosted credit went out, the prevalence of that improvement was inverted.
That’s why many are still battling to get back the Child Tax Credit. And that’s something lawmakers have not noticed, not to look the same as the boost that was approved in 2021, but at this point, any progress is inclined to be better than nothing. With that being said, it’s hard to say whether the boosted Child Tax Credit will make a return in 2023.
While legislators on both sides of the political field seem to approve it’s necessary, there’s discussion as to how to bring that boost to life again. Some legislators, for example, want to inflict a minimum income condition for eligibility. But that modification could make it so the country’s underprivileged families aren’t qualified to receive the boosted credit, either at all or in full.
