Stimulus Update: A New Child Tax Credit Just Came to One State. Will More Follow?
- Many parents have struggled this year in the absence of the boosted Child Tax Credit.
- New Jersey is introducing its own tax credit to provide relief at a time when living costs are soaring.
One state is trying to give parents some financial relief.
Last year, when living costs started to soar due to inflation, parents of children got some relief in the form of the boosted federal Child Tax Credit. Prior to 2021, the Child Tax Credit's maximum value was $2,000 per child. Last year, that maximum value rose to $3,600 for children under the age of 6 and $3,000 for children aged 6 to 17.
The boosted Child Tax Credit was also partially paid out in advance. Monthly installments hit recipients' bank accounts from July through December of last year.
Lawmakers were hoping to keep the enhanced Child Tax Credit in place for 2022. And given the way inflation has really surged this year, that would've been a major financial lifeline for parents.
But unfortunately, lawmakers failed to retain the boosted Child Tax Credit, so its former maximum value has reverted back to $2,000. And now, eligible parents can't collect this year's credit until they file their 2022 tax returns in 2023.
One state, however, is introducing its own child tax credit in an effort to provide relief to residents. And we could see more states go a similar route.
A big boost for parents
Just as many states have stepped up to send out stimulus checks this year in the absence of a fourth federal stimulus round, one state is stepping up to put its own child tax credit into place. That said, its new credit is really only targeted to lower earners -- those who are most likely to struggle to keep up with their living costs.
New Jersey is one of the more expensive states in the country to call home, largely due to its high housing prices and property taxes. But New Jersey lawmakers recognize that some residents are really struggling without the enhanced federal Child Tax Credit. As such, New Jersey is putting its own credit into place in an effort to help make life in the Garden State more affordable.
New Jersey's child tax credit will be worth up to $500 per child aged 5 and under. Residents who earn $30,000 or less will be eligible for a full credit, and from there, the credit will start to phase out as earnings increase. Anyone earning over $80,000 a year will not be eligible for New Jersey's child tax credit.
Furthermore, the state's child tax credit will not be made available in installments. Rather, eligible recipients will have to claim the credit on their 2022 tax returns. As such, families should not expect that money to come in until next year.
Now one good thing about New Jersey's child tax credit is that it's fully refundable. If an eligible recipient is in line for a $500 credit but owes no tax, they'll still get their $500. Many federal tax credits are not refundable, so that means the most they can do is reduce a given filer's tax bill down to $0.
A modest dose of relief
New Jersey's child tax credit isn't nearly as generous as the boosted federal Child Tax Credit that was approved for the 2021 tax year. But at a time when living costs are absolutely soaring, residents will no doubt accept whatever relief is available to them with open arms.
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