The advanced payments of the child tax credits have been helping a lot of parents this year. But did you realize those payments could very easily come to an end soon? A bill was passed in March of 2021 that addressed things like the 2020 unemployment compensation and the 2021 child tax credit. This credit was increased to as much as $3600 per kid under six and still kept it $3000 for older kids. This advanced payments child tax credit was a one year thing though!
Of course, our politics are dealing with hyperpolarization. There is a bill being fought over called the Build Back Better plan, which would extend the advanced payments of the child tax credit for 2022. The Republicans oppose it universally and would end those credits. Now they would fall back to $2000 per child under 17 and wouldn’t be fully refundable as it is for 2021.
This all started when President Trump pushed his tax cuts and in order to pass it Congress temporarily raised the standard deductions, eliminated exemptions, and increased the child tax credit from $1000 to $2000. The tax cuts for corporations were made permanent. But in 2025 the changes made by the Republicans will end. They could extend them and maybe they will. But they can’t agree on much that I can see now. With how things stand currently, a $2000 partially refundable credit could mean less money for families instead of the proposed $3000-$3600 fully refundable credit. Remember fully refundable means if you don’t owe any tax you get the remainder of any tax credit not used to pay your taxes.
But they are fighting like cats and dogs over that bill. And that bill has other things like making the child and dependent care tax credit refundable as well among many other things. If you oppose it fine, but remember the advance child tax credit payments could be just a credit for 2021 and then it’s over.
If you supported that tax credit I would make myself heard, especially if your representatives and senators are Democrats. Truthfully if they are Republicans, sure mention your support for the credit, but I don’t think they will do much to help you. They are committed to opposing the bill as far as I can see. But I would still mention it to them.
So in 2025 the tax code will go back to what it was, except for the corporate tax cuts, and your standard deduction that was $12700 in 2017 which rose to $24000 in 2018 for married filing jointly filer will be sliced about in half. They will adjust it for inflation but it will go down. And of course the exemptions will return too. Just keep in mind those goodies were the sugar to make the corporate tax cuts go down. Maybe Congress will work together to save or extend those for individuals. Maybe . . . but I won’t hold my breath.
You also may find it helpful to read my earlier post on organizing bills to save time later when doing tax preparation.