Child Tax Credit
What does it mean that the Child Tax Credit is fully refundable?
The Child Tax Credit has been extended until the end of 2022 and further changes should help some of America's poorest families.
The House of Representatives passing President Biden's Build Back Better bill is a big step towards extending the expanded Child Tax Credit, albeit a potentially unfulfilled one. There is still much wrangling to be done in the Senate before the bill can be signed by the President.
One aspect of the bill that has been under constant flux is the Child Tax Credit. Originally planned to be extended until the end of 2025, negotiation with Democrat 'moderates' has reined it back in until the end of 2022. There has also been efforts to try and put limits on who can access it, such as needing to be working or preventing immigrants from receiving it.
With one bill, we were able to cut childhood poverty in this country nearly IN HALF. This is what good public policy can do. We must extend the expanded Child Tax Credit. pic.twitter.com/JutOpoatA5— Bernie Sanders (@BernieSanders) November 16, 2021
Prior to the American Rescue Plan, signed off back in March, there were greater limits on who could receive the credit, but the Plan changed the whole system. One important change was to how the tax could be 'refunded', becoming fully refundable in March, which has been extended as part of the Build Back Better plan.
What does fully refundable mean?
Before March 2021, low earners could only get part of the tax break, up to $1,400, as a refund, while higher earners would get its full value. They also weren’t eligible for the credit if they made less than $2,500 a year, as it used to be the case that people would have to earn over a threshold before they could file a tax return to receive the credit.
The Build Back Better Act extends the monthly Child Tax Credit, sending up to $3,600 per child to over 35 million working families!— Pramila Jayapal (@PramilaJayapal) November 21, 2021
Our agenda puts money in people’s pockets.
However, the changes introduced in March mean that nothing needs to be paid back in taxes come someone's 2021 tax return. The Child Tax Credit being fully refundable means recipients are likely to be eligible for a refund on it, which would then offset taxes you would have to pay at the end of the financial year.
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What is likely to happen with the Child Tax Credit in the Senate?
With the Build Back Better plan not yet passed by both arms of government, the fate of the credit is unknown. Should Congress not vote to approve the package or pass a separate law extending the credit, it will expire and return to its initial structure; this would mean 24 million children would become ineligible next year.
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