The Child Tax Credit (CTC) program, which offers a rebate to qualifying families based on their income and the number of children in the home, has been one of the most popular tax incentives during the previous two years.
Some MPs’ objection to making the Child Tax Credit fully refundable, i.e., allowing low-income families to qualify for the maximum credit irrespective of their income, appears to have halted negotiations on the expansion of the credit.
Child Tax Credit 2023
Even without full refundability, there may be middle-ground solutions that would enhance the credit for some of the almost 19 million children whose families currently receive a reduced credit because their income is too low.
The CTC has several features that limit the benefits available to low-income households. Each of these is modifiable. The minimum yearly income for a family to qualify for the credit under the Tax Cuts and Jobs Act of 2017 is $2,560.
Above that threshold, benefits begin at 15% of each dollar earned. With the new law, up to $1,600 of the credit can be refunded in 2023, up from $1,400 under the old law and $1,500 in 2022. Inflation is factored into the adjustment each year.
There are several ways that Congress may increase the benefits for low-income families to match the total $2,000 per child benefit that more than 45 million children in the middle- and high-income households get annually. Four of them were studied by the Tax Policy Center.
Read more: Social Security 2023: Will payments be delayed due to holidays?
Family Security Act 2.0
One possibility is to do away with the $2,500 cap on earned income so that families’ benefits are based on all of their income.
This is a part of the Family Security Act 2.0, which Senator Romney and others have suggested (FSA 2.0). For families who can’t get the entire credit as a return now, this would be a $375 boost.
According to TPC’s projections, low-income families would gain from this reform 85% of all. By 2023, the modification would have brought in an additional $2 billion in benefits or $2 billion in lost revenue for the government.
Read more: Retirement: How much Social Security benefits can I get?
