Will There Be a Child Tax Credit in 2023?
- The Child Tax Credit got a massive boost in 2021 that helped many families shore up their finances.
- While the credit may not get a boost this year, eligible filers can still claim it.
- The Child Tax Credit is worth $2,000 per child, but only $1,540 is refundable.
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Raising children is hardly an inexpensive feat. Parents routinely incur massive costs related to raising kids, from childcare fees to healthcare to apparel and food.
Lawmakers are aware that having kids can constitute a financial strain, so they put a tax credit in place designed to help ease that burden. It’s called the Child Tax Credit, and it got a lot of publicity in 2021 when it underwent a major enhancement under the American Rescue Plan.
That year, the maximum value of the Child Tax Credit rose from $2,000 per child to $3,000 per child aged 6 to 17, and $3,600 for children under the age of 6. The credit also became fully refundable, which meant that someone who owed the IRS no money could still claim its full value.
Plus, half of the Child Tax Credit was made available via monthly installment payments that hit bank accounts between July and December of 2021. It was those consistent monthly payments that helped many families avoid going into debt and boost their savings account balances at a time when inflation levels were already starting to tick upward in a notable way.
But that helpful boost to the Child Tax Credit never got extended past 2021. And as a result, many parents struggled to cover their living costs in 2022.
But what does 2023 have in store for parents? Will there be a Child Tax Credit? And how much will it be worth?
The credit never went away
One big misconception is that the Child Tax Credit went away after the 2021 tax year. That’s not true at all. It simply reverted to its former rules and value in the absence of an extended enhancement.
As such, there absolutely is a Child Tax Credit in 2023, and it’s worth up to $2,000 per eligible child. And while there are no plans to make the credit available in the form of monthly installments, those eligible for it can still get their money when they file their 2023 tax returns in 2024.
Now one thing worth noting is that the Child Tax Credit is no longer fully refundable. This year, only $1,540 per child is refundable. This means that if someone doesn’t owe the IRS more than $1,540, that’s the maximum benefit they’ll get.
A boost isn’t off the table
As of the start of 2023, there’s been no approved boost to the Child Tax Credit. But that doesn’t mean lawmakers aren’t still fighting for one.
Many agree that the credit needs an enhancement to give families more relief. So it’s possible that legislation will pass this year that changes the credit for the better, whether by increasing its maximum value or allowing the credit to be fully refundable once again.
As far as monthly installment payments go, those are still a possibility as well. Given that inflation is still quite high, getting paid on a monthly basis could make it much easier for families — especially lower-income households — to cover their bills without having to resort to debt.
In fact, 2021’s Child Tax Credit boost helped many families emerge from poverty and avoid issues with food insecurity. Lawmakers are keenly aware of that, which is why it’s too soon to write off the idea of an enhanced credit in 2023.
Source By: fool.com
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