Tax Relief for American Families and Workers Act of 2024 Restore Some Of What’s Lost After Expanded Child Tax Credit Expired
Tax Relief for American Families and Workers Act of 2024 Restore Some Of What’s Lost After Expanded Child Tax Credit Expired
Ways and Means Committee Chair Jason Smith released the Tax Relief for American Families and Workers Act of 2024. This proposed tax package is a horse trade in business deductions, international trade, housing, and a token effort in restoring what was lost when the Expanded Child Tax Credit expired. One of the key highlights is the significant overhaul of the child tax credit, while making it more complicated with ineffectual work requirements.
Enhancing the Refundable Portion: The current child tax credit comprises nonrefundable and refundable portions, designed to phase in with rising household income. Notably, families without any earned income in the past year are currently ineligible for the credit. The proposed reform seeks to expedite the increase in the refundable portion, retroactively setting it at $1,800 for 2023 and incrementally raising it by $100 annually until it reaches $2,000 in 2025.
Tailoring the Phase-In to Children: A significant shift in the proposed tax package is the transition from a fixed phase-in per household to a variable one based on the number of children. Under the current system, the 15% phase-in rate applies universally, irrespective of the number of children claiming the credit. The proposed change introduces a per-child phase-in of 15% after an initial $2,500 earnings threshold, notably impacting low-income working families with two or more children.
Indexing the Child Tax Credit: Starting in 2024, the proposal introduces indexation for the child tax credit, a departure from its non-adjustable nature under current law. Unlike other family provisions, the child tax credit’s value will be automatically adjusted for inflation each year, preventing the erosion of its real value. This measure aims to shield middle-income families from the adverse effects of inflation on the credit’s value.
Flexible Earnings Calculation: The tax relief proposal includes a provision allowing families to choose between the current or previous tax year when calculating their earnings to determine their credit amount. This flexibility mitigates the impact of volatile annual income, particularly for low-income workers, providing a stable foundation for families to claim their maximum refundable portion.
Bottomline: The Tax Relief for American Families and Workers Act of 2024 restored some of the lost support for low-income working families raising children. The proposed changes to the child tax credit signify some positive step forward for American families, with dark clouds of unnecessary and ineffective requirements as a step back .
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