As Congress works on finalizing the budget, the One Big Beautiful Bill proposed by President Donald Trump promises to help families by increasing the Child Tax Credit and offering other forms of financial relief.
This bill aims to provide economic support to working and middle-class Americans, while also addressing the national deficit. The proposed changes to the Child Tax Credit, if passed, could make a significant difference for families across the country.
What is the Child Tax Credit?
The Child Tax Credit is designed to provide financial support to parents and caregivers by reducing their federal income taxes or offering a partial refund. For many families, this tax credit plays an essential role in easing their financial burden.
In 2017, the Tax Cuts and Jobs Act temporarily increased the maximum credit from $1,000 to $2,000. However, this increase is set to expire at the end of the year unless Congress takes action.
Proposals in the One Big Beautiful Bill
The proposed versions of the One Big Beautiful Bill put forward by the Senate and House aim to raise the Child Tax Credit, but with some differences.
- Senate Proposal: The Senate’s version suggests raising the credit to $2,200 starting in 2025. It also includes a provision to increase the credit in future years to keep up with inflation.
- House Proposal: The House version proposes increasing the credit up to $2,500 from 2025 to 2028. After 2028, the credit would be capped at $2,000, with future increases tied to inflation.
What Will This Mean for Families?
While these changes are good news for many families, some policy experts believe the increases may not fully benefit the lowest-income families.
Experts argue that middle and higher-income families will benefit more from these increases, while very low-income families may not see the full benefit of the credit.
Currently, the Child Tax Credit can be worth up to $2,000 per qualifying dependent under the age of 17. However, if the credit exceeds the amount owed in taxes, a family can receive up to $1,700 as a refund.
Low-income families often do not receive the full amount, while high-income families see the tax credit phase out. For example, the tax break starts to reduce for married couples earning over $400,000 or $200,000 for other filers.
Challenges with the Current System
Despite the proposed changes, there are still significant issues with the current system. Around 17 million children do not receive the full Child Tax Credit because many low-income families do not owe enough in taxes to qualify for the credit.
The Senate and House proposals do not address this issue, which has been a central concern for many policy experts. Last year, the House passed a bill to raise the refundable portion of the credit to help low-income families, but it was rejected by the Senate.
Other Provisions in the One Big Beautiful Bill
Apart from the Child Tax Credit, the One Big Beautiful Bill includes other measures aimed at saving families money. One of the proposed measures is a $4,000 deduction for Social Security.
The bill also introduces a new $1,000 tax credit designed to put money back in the pockets of families, providing further financial relief.
The One Big Beautiful Bill is designed to offer financial support to many American families, with the Child Tax Credit being a key component. While the proposed increases will help middle and higher-income families, the challenges faced by low-income families remain unaddressed.
As Congress continues to negotiate the final details, it remains to be seen how effective these changes will be in providing real economic relief to those who need it most.
FAQs
What is the Child Tax Credit?
The Child Tax Credit is a financial benefit that helps families reduce their federal income taxes or receive a partial refund. The credit amount is typically up to $2,000 per qualifying child under 17.
How will the One Big Beautiful Bill affect the Child Tax Credit?
The bill proposes to increase the Child Tax Credit to up to $2,500 for some families and make adjustments for inflation in future years.
Will low-income families benefit from the Child Tax Credit increase?
Experts believe low-income families may not see the full benefit, as many do not owe enough taxes to qualify for the full credit.
What other financial relief is included in the One Big Beautiful Bill?
In addition to the Child Tax Credit, the bill also proposes a $4,000 Social Security deduction and a new $1,000 tax credit to provide further financial relief to families.
When will the changes to the Child Tax Credit take effect?
The proposed changes to the Child Tax Credit are expected to take effect in 2025, with some provisions gradually increasing over time.
