In a bipartisan effort, the House of Representatives has passed a tax bill that aims to expand the child tax credit through 2025, potentially benefiting taxpayers as early as this year. The package, totaling $78 billion, falls short of reviving the expanded child tax credit that families were able to claim during the Covid-19 pandemic. However, it does propose increasing the maximum refundable tax break to $1,800 per child for tax year 2023, up from the previous $1,600 limit.

Under the proposed bill, the maximum refundable tax break would continue to rise to $1,900 for tax year 2024 and then to $2,000 the following year, with adjustments made for inflation. If the bill is successfully passed in the Senate soon, eligible families filing their 2023 taxes in the upcoming weeks could claim the expanded credit, potentially enjoying an average tax break of $680 this tax season, as projected by the Urban-Brookings Tax Policy Center.

Although the bill has garnered support from both parties, it remains uncertain whether it has the necessary votes to pass in the Senate. Currently, parents who earn less than $200,000 annually, or $400,000 for couples filing jointly, and have children aged 17 and under qualify for the full child tax credit. However, families must currently earn at least $2,500 or have three eligible dependents to qualify for any amount of the credit.

The new proposal aims to boost the credit by allowing taxpayers to take 15% of their income over $2,500 and multiplying it by the number of eligible children they have, thereby calculating their maximum credit amount. While the income thresholds would remain unchanged under the new proposal, lower-income families could potentially receive larger checks due to the increased refundable portion of the credit. Furthermore, families will have the option to use the previous year's income if it enhances their credit eligibility.

If implemented, the proposed expansion is expected to greatly benefit children and their families. The Center on Budget and Policy Priorities estimates that more than 1 in 5 children would initially benefit from the proposal, with around 400,000 children potentially moving out of poverty. Moreover, according to their projections, families of at least half of the 16 million children eligible for the expanded credit could receive $630 or more, while 40% of those families could gain $1,000 or more. In the first year alone, a quarter of the children's families benefiting from the proposal could gain at least $1,400.

The Senate's decision on the bill remains critical as it holds the potential to significantly impact millions of families across the country. The proposed expansion aims to provide much-needed financial relief to families, especially those with lower incomes. As the bill moves forward, the future of the child tax credit expansion hangs in the balance, leaving families eagerly awaiting its final outcome.