Last-Minute Congressional Deal Aims to Deliver a Larger Child Tax Credit This Year

In a groundbreaking move, Congressional negotiators have unveiled a significant $80 billion deal designed to enhance the federal child tax credit, potentially bringing about a substantial boost in benefits for low-income parents as early as this year. 

Spearheaded by Senate Finance Committee Chairman Ron Wyden (D-Ore.) and House Ways and Means Committee Chairman Jason T. Smith (R-Mo.), this bipartisan agreement could usher in positive changes - and cash - for millions of families. 

What the new law entails

The proposed law aims to make the program more generous, with a particular emphasis on aiding low-income parents and ultimately giving more money to help them get ahead financially. 

Notably, the deal doesn't solely focus on expanding the child tax credit but also addresses business tax breaks favored by corporate America, ensuring a balanced bipartisan approach. 

While low-income families could benefit greatly, corporations will be able to also deduct a lot more than these families are likely to receive. 

How much more money you might receive

Under the current law, the maximum tax credit is $1,600 per child. Under this new legislation, that amount would increase to $1,800 for the 2023 tax year, $1,900 in 2024, and $2,000 in 2025, per child respectively. The new bill would also increase the future limits to adjust for inflation, possibly on an annual basis. 

This could stack up quite a bit for those with multiple children and could be a huge benefit to lower-income families. The estimation by 

What’s next and how soon could it pass?

With potential challenges in gaining House Republican support, the bill's fate remains in limbo. The bill still needs to be written into actual legislation and secure votes to pass both the House and the Senate before it can go into effect.

Many are hopeful though, as the proposed law contains elements attractive to both sides and the current agreement comes after months of standstill negotiations. 

At this point, it would be difficult for it not to pass since it's billed as a bi-partisan agreement so there are incentives on both sides to get it to pass. The expected time frame is as soon as possible. 

The goal of everyone involved is to get it passed when the next session opens, which is on January 29th. 

Will you get the benefits when you file your taxes this year?

Should the law pass in the coming weeks as budget negotiations reach their deadline, families would likely be able to take advantage of the tax credit this year (for the 2023 tax filing year.)

“My goal remains to get this passed in time for families and businesses to benefit in this upcoming tax filing season, and I’m going to pull out all the stops to get that done,” Wyden said on Tuesday, January 16th. 

You may want to pay close attention to this when it comes to filing your taxes to see if the timeline might work for you, so you can make the right money moves come tax time. 

While you can't wait forever to see if it will pass, we all should have a good idea within the first two weeks of the session if it's going to happen or not. 

Other considerations

While the most interesting parts of the bill to most are the tax breaks for low-income families, the bipartisan support needed to secure the deal was only secured in the agreement on giving significant tax breaks to businesses as well. 

One of those breaks is looser limits on deductions for interest business expenses, expanding what businesses can write off. 

There are also some benefits being restored related to an interest deduction and an extension of bonus depreciation. It's important to understand the full ramifications of the bill to see what the total impact might become.

The good news is that since the bill has already been announced as something that has been agreed upon, it's not likely that this will make or break it in terms of it getting passed. 

Anything can happen when the next session of Congress opens, but as of right now, it looks likely to pass in the next two or three weeks. 

Bottom line

As Congressional negotiators unveil this groundbreaking deal, the potential expansion of the federal child tax credit holds immense promise for millions of families, especially those navigating financial challenges. 

If successfully enacted, this proposed law could signify a substantial step toward supporting families and nurturing a more inclusive and resilient society. According to Wyden, an estimated 15 million children would benefit as a result of the expansion, if put through.