If a new tax law is approved, families in New York stand to receive up to $2,000 per child from the Internal Revenue Service. Recently, the House of Representatives approved the Tax Relief for American Families and Workers Act. This legislation includes an extension of the Child Tax Credit, enabling eligible taxpayers to potentially claim hundreds of extra dollars in refunds over the next few years. However, the bill awaits approval from the Senate.
Senator Kirsten Gillibrand (D-New York) underscored the significant advantages the suggested agreement could bring to families in New York. This includes streamlining the qualification process for low-income families to access the Child Tax Credit, adjusting the credit to accommodate inflation, and potentially lifting around 400,000 children out of poverty.
Expanding the Child Tax Credit: A Closer Look at the Proposed Changes
Gillibrand stated, “The Child Tax Credit is crucial for working families and remains one of our most effective tools in combating child poverty. With the expiration of the Child Tax Credit expansion at the end of 2021, child poverty has more than doubled nationwide, which is simply unacceptable.
This proposed credit extension would positively impact nearly 900,000 children in New York and save the average family nearly $700 per year. I urge my colleagues to support the expansion of the credit to provide additional assistance to the children most in need.”
Here’s a breakdown of what the expanded tax deal entails:
- Currently, the maximum refundable child tax credit is capped at $1,600 per child for the year 2023. However, the proposed provision would raise this amount to $1,800 per child in the tax year 2023, $1,900 in 2024, and $2,000 in 2025.
- The expanded tax credit would offer a larger credit for low-income families with more than two children. While the original Child Tax Credit is calculated by multiplying a family’s income above $2,500 by 15%, the expanded credit would multiply the family’s income above $2,500 by 15% and additionally by the number of children in the family.
Furthermore, the Child Tax Credit would be adjusted for inflation in the current year and the following year. Previously, eligibility for the original credit required a parent to have at least $2,500 in annual income. However, the new credit would allow taxpayers to utilize their income from either the current or prior year in calculations, ensuring that families experiencing sudden drops in income can still qualify.
A New Child Tax Credit Could Be a Reality
During the peak of the coronavirus pandemic, the Child Tax Credit program underwent a temporary expansion, which notably augmented credit amounts and introduced the possibility of monthly payments. However, neither of these provisions is included in the current bill.
Under the 2021 American Rescue Plan, the child tax credit was elevated from $2,000 per child to $3,000 per child for children aged six and above, and from $2,000 to $3,600 for children under the age of six. Additionally, a portion of the credit could be received as monthly payments, potentially amounting to up to $300 per child.
Regrettably, these enhanced credit amounts and monthly payment options were only applicable for the 2021 tax year. With the passage of the new bill in the House, it seems improbable that they will be reinstated.
New Stimulus Checks Issued in Michigan
Following Governor Gretchen Whitmer’s approval of $1 billion in tax cuts in March last year, over 700,000 households in Michigan are set to receive stimulus checks. Whitmer announced that the distribution of these checks is scheduled to commence on February 13, coinciding with the state’s augmentation of the Earned Income Tax benefit.
The recently enacted state law aims to provide additional stimulus checks by elevating Michigan’s Earned Income Tax Credit from 6% to 30% of the federal tax credit. As per the Internal Revenue Service guidelines, individuals in Michigan earning less than $63,398 annually, with investment income below $11,000, qualify for the federal Earned Income Tax Credit.
Eligible recipients of the stimulus checks are taxpayers who meet the requirements for the Earned Income Tax Credit in 2022. This credit is determined based on household income and the number of dependent children, designed to assist individuals who work but earn a modest income.
Also, the formerly named “Working Families Tax Credit,” the earned income tax credit was crafted to aid low-income individuals, covering those with incomes below $59,187 and investment income under $10,300 as of 2022.
In 2022 and 2023, specific families may receive payments of up to $2,080 and $2,229, respectively, depending on factors such as income level, marital status, number of children, and handicap status.