The child tax credit may expand. Here’s what it means for you.

The House of Representatives voted Wednesday to approve a roughly $80 billion deal to expand the federal child tax credit that would make the program more generous, primarily for low-income parents, as soon as this year.
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The bipartisan agreement was reached by Senate Finance Committee Chairman Ron Wyden (D-Ore.) and House Ways and Means Committee Chairman Jason T. Smith (R-Mo.), who worked for months to finalize a deal. The bill’s path to passage in the Senate remains uncertain, but it could give President Biden a partial victory on one of his top domestic economic policy priorities: bringing back something like the expanded child tax credit, a centerpiece of his 2021 American Rescue Plan.

“This is a win for millions of small businesses, a win for millions of working families, a win for America,” Smith said during debate on the House floor on Wednesday.

The deal would make the existing child tax credit more generous. In exchange, it would also continue several business tax breaks favored by corporate America. The deal emerged in part because of substantial bipartisan support for both provisions across both parties. Republicans initially expanded the credit in 2017 tax cut legislation, and even some liberal economists favor the business provisions.

Taxpayers who are currently eligible for the current tax credit would continue to be eligible. The changes appear most beneficial to low-income parents with multiple children.

But under the agreement announced Tuesday, poor families would be newly eligible to receive the tax credit for every child — even if they do not qualify for the full $2,000 per kid.

For example, a single mother with three kids earning $10,000 annually currently only qualifies for $1,250 in child tax credit benefits. A single mother with three kids earning $150,000 annually receives $6,000, or $2,000 per child.

Under the emerging deal, the single mother earning $150,000 would get the same credit, $6,000. But the benefit for the mother earning $10,000 would triple — from $1,250 for three kids to $3,750 for three kids.

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