How Child Tax Credits for 2024 Could Change

Child tax credits are likely to be expanded thanks to a $78 billion tax agreement between the Democrat-led Senate Finance Committee and the Republican-helmed House Ways and Means Committee.

On Tuesday leaders agreed a bipartisan deal that would expand child tax credits, a Democrat sticking point, while also boosting some business tax credits, which was raised by Republicans.

House Ways and Means Committee Chairman Jason Smith, a Missouri Republican, and Senate Finance Committee Chairman Ron Wyden, an Oregon Democrat, hailed the agreement as a "common sense, bipartisan, bicameral tax framework that promotes the financial security of working families, boosts growth and American competitiveness, and strengthens communities and Main Street businesses."

Legislation must still be drafted and get sufficient votes for approval in both the Republican-controlled House and the Democratic-led Senate, which is not guaranteed. Wyden has said he is hoping to pass the deal by the beginning of the tax filing season on January 29.

"The agreement announced today by Chairman Smith and Chairman Wyden is a thoughtful starting point for the House to begin the process," Republican Idaho Sen. Mike Crapo, who is on the finance committee, said in a statement. "I will continue working with my Senate colleagues to build broad, bipartisan support for a tax package that provides appropriate relief for working families and businesses."

The Center on Budget and Policy Priorities (CBPP), a liberal-leaning think tank, has said the new policy will benefit an estimated 16 million children from low-income families.

Read more: The Child Tax Credit: Who Qualifies and How to Claim It

CBPP's Chuck Marr, an expert on federal tax policy, told Newsweek: "This bipartisan proposal rightly focuses on the roughly 19 million children who today are left out of the full Child Tax Credit because their families' incomes are too low. This proposal would increase the credit for more than 80 percent of these children —about 16 million children—lifting as many as 400,000 children above the poverty line in the first year and making an additional 3 million children less poor."

Child Tax Credits have been on the agenda of potential GOP election candidate Nikki Haley. Speaking at a CNN town hall in New Hampshire on Thursday, Haley said she is "for child care tax credits for everyone. If you're going do it, do it across the board and make sure that it's fair."

This is a departure from the stance of her political group Stand for America, which once referred to child tax credit as "no-strings-attached welfare handouts."

President Joe Biden has signaled his support for the proposed legislation.

"We appreciate Chairman Wyden and Chairman Smith's work toward increasing the Child Tax Credit for millions of families and supporting hundreds of thousands of additional affordable homes, and look forward to reviewing the full details of their agreement," White House spokesman Michael Kikukawa said in a statement seen by Newsweek.

How Could Child Tax Credits Change?

According to a press release regarding the expansion issued on Tuesday, child tax credits will change in four ways if the deal makes it into legislation.

• Enhanced child tax credit access: a gradual rise in the refundable segment of the child tax credit would be implemented for the years 2023, 2024, and 2025.
• Penalties removed for larger families: to ensure equitable application of the child tax credit phase-in to households with multiple children.
• A one-year income lookback: aimed at providing taxpayers with the flexibility to use either their current or prior-year income for calculating child tax credit in 2024 or 2025.
• Inflation-adjusted relief: this would adjust the tax credit for inflation, starting in 2024.

Update 01/22/24, 06:28 a.m. ET: This article has been updated with comment from CBPP's Chuck Marr.