How Biden's Budget Would Save Families Thousands per Year

The potential savings are enormous.

The White House recently released a loaded budget proposal hot enough to boil Congress. The $6.9 trillion budget proposes everything from housing assistance to free community college.

Biden claims the budget would lower the federal deficit and cut costs for American families. Here are some changes the proposed budget would make to the American economy:

• Fund universal free preschool.
• Lower health insurance premiums for millions of Americans.
• Create a national comprehensive paid family and medical leave program that would provide workers with up to $4,000 a month when they need time off.

The budget includes a revamping of the Child Tax Credit. If passed, the budget would potentially save families thousands per year by depositing money directly into their bank accounts.

Here's how much the boosted Child Tax Credit could save you

The budget proposal would expand the Child Tax Credit, which offers qualifying parents refunds to help them afford childcare. The budget would bump the credit from $2,000 to $3,000 per child, up to $3,600 for children under 6 years old.

For example, a parent with two children, one age 5 and one age 15, would go from earning $4,000/year to $6,600/year in tax credits to help with childcare costs.

In 2021, the American Rescue Plan boosted the Child Tax Credit to $3,000 per kid, but the White House failed to renew the expanded credit. The credit was fully refundable. Parents owed refunds received monthly direct deposits to their bank accounts, or checks through the mail.

Biden's proposed Child Tax Credit would once again make the credit fully refundable and paid to caregivers regularly. The revamped credit would last through fiscal year 2025.

The revamped Child Tax Credit may be a sticking point during the upcoming budget negotiations between members of the Democratic and Republican parties.

Will the budget proposal pass?

Unlikely. Congress is divided, and the Republican party seems likely to reject Biden's plan. But that doesn't mean the expanded Child Tax Credit will fail to pass in a bipartisan compromise.

If the proposal fails, what happens to the boosted Child Tax Credit?

If the proposal fails, Congress must agree on an alternative budget to fund the government and raise the debt ceiling. Failure to pass an alternative budget would lead to the U.S. defaulting on its debt, but that's unlikely to happen.

Chances are, Congress will pass an alternative budget.

An alternative budget may still include an expansion to the Child Tax Credit. However, parents shouldn't count on it. Congress has failed to expand the credit before. Plus, Biden wants to raise taxes on the wealthy to fund his proposals, which is a contentious topic among Republicans.

Congress may pass a more limited version of the Child Tax Credit expansion. Such an expansion might boost the credit to less than $3,000 per child.

How does the Child Tax Credit work right now?

Eligible taxpayers receive tax credits every year. Parents get $2,000 per child under age 17 and $500 each for other dependents (such as an older child or a relative). However, parents whose refunds exceed taxes owed only get partial refunds, up to $1,400 per child.

Only taxpayers with less than $200,000 in income qualify. Married couples who file jointly and make less than $400,000 also qualify. The best tax software makes it easy to file taxes and determine whether you are eligible for the credit.

Although unlikely to pass, Biden's budget indicated the expanded Child Tax Credit is a priority for the Democratic Party. Even if the budget proposal fails, the boosted Child Tax Credit may pass in an alternative budget compromise, saving families thousands of dollars.