- The boosted Child Tax Credit pulled millions of children out of poverty in 2022.
- So far, the enhanced credit hasn't been back in play, even though President Biden has pushed for it.
Should parents write off that extra money for good?
Almost one year ago, the American Rescue Plan was signed into law. That massive relief bill not only sent stimulus checks into Americans' bank accounts, but also boosted an important tax credit -- the Child Tax Credit.
Prior to 2021, the Child Tax Credit maxed out at $2,000 per child and was only partially refundable. That meant if a household claiming the credit owed the IRS no money, it couldn't collect its full $2,000. The credit, like other tax credits, was also only paid in lump sum form as a tax refund.
Last year, the Child Tax Credit got a number of key enhancements. First, its value was boosted to a $3,000 maximum for children aged 6 to 17, and a $3,600 maximum for children under the age of 6. The boosted Child Tax Credit was also made fully refundable, and half of it was paid out in monthly installments that began in July and wrapped up in December.
The boosted Child Tax Credit did so much good that lawmakers initially sought to make it permanent. President Biden then settled on a one-year extension for 2022 and wrote that language into his Build Back Better plan.
But at this point, Build Back Better is stalled in the Senate, and the boosted Child Tax Credit is a major source of contention. In fact, those who relied on the enhanced credit last year already had to make it through the month of January without an installment payment.
What should families expect this year? Is it time to write off the boosted Child Tax Credit completely? Or is there still hope?
Hope for the best but plan for the worst
President Biden still wants to offer the boosted Child Tax Credit for 2022. But at this point, he faces strong opposition from Democratic Senator Joe Manchin, and without his approval, the credit is unlikely to get approval in a divided Senate.
That doesn't mean Biden won't get creative and find another way to push a boost to the credit through. Right now, there are already talks about breaking up the massive Build Back Better bill so funding can be allocated to other key initiatives that aren't as controversial as the boosted Child Tax Credit. But lawmakers might manage to write the enhanced credit into another bill, or even move it forward on its own using other tactics.
Still, that's not something families can count on at this point. A better bet may be for households that relied on that credit last year to rework their budgets, if possible, and try to find ways to boost their incomes. That could mean working extra shifts or taking on side gigs to make ends meet.
The tax credit isn't completely gone
While the boosted Child Tax Credit may not stick around for 2022, the credit itself isn't disappearing. In a worst-case scenario, the credit will revert to its former value and be payable as a lump sum during next year's tax-filing season. That's not ideal, but it's better than the credit going away completely.
Also, a lot of households who received installment payments for the boosted credit last year may still be eligible for funds once they file their 2021 tax returns. Anyone in that boat should consider filing early this year to expedite their refund.
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