House passes federal child tax credit expansion. The change could help low income Californians

An estimated 2 million California children in lower income families would benefit from the expansion of the federal child tax credit bill now moving through Congress, according to Washington’s Center on Budget and Policy Priorities.

The tax plan would make it easier for lower income families to get the credit, and increase the amounts available.

It’s part of a $78 billion tax cut bill, a compromise between conservatives seeking more incentives for business and Democrats eager to restore at least some of the child tax benefits that ended when Covid-era relief benefits ended

The bill is funded largely by changes to another Covid year tax break for business. It passed the House January 31 with strong bipartisan support. The Senate plans to take it up next.

Currently, qualifying families can take a $2,000 per child credit for children under 17. Taxpayer income must be less than $200,000 for a head of household filers and $400,000 for joint filers for the full credit.

The Child Tax Credit was as much as $3,600 per child during the Covid era, and experts found that the change helped lift millions of children out of poverty.

Bigger tax credits

The credit itself will remain at $2,000, which means a qualifying taxpayer can subtract that amount from the tax they owe.

The Child Tax Credit is partly refundable, meaning that even if someone does not have tax liability or has too little income to get a credit subtracted, they can receive a tax refund break.

Currently, families can get as much as $1,600 as a refund. The bill would up those amounts to as much as $1,800 on last year’s taxes, which are due in April, $1,900 this year and the maximum credit next year.

Qualifying families earning less than $27,700 could see an increase in the average tax credit of $1,040 next year , according to estimates from another budget watchdog, the Institute on Taxation and Economic Policy, a progressive Washington research group.

Those with incomes between $27,700 and $53,300 could see a $500 jump in their credit.

Who may get help

According to the Center on Budget and Policy Priorities, a left-leaning Washington research group, these are some examples of who would benefit:

A single mother with a toddler and an elementary school child, working as a gas station cashier and earning $24,000 a year, would get a credit of $3,920, up $400 from the current level.

A married couple with three children. One parent is a farm worker, making $32,000 annually. The other parent stays home to help take care of two younger children, while an older child is in school. They’d get roughly $1,940 per child, a total of $5,830 under congressional legislation, a $975 increase.

A single parent with two children, who earns $18,000 as a home health aide, would get a credit of $1,800 per child in the first year for each child, up $1,275 over current law.

The center estimates that nationwide, more than 400,000 cashiers and their families would see benefits.

Also likely to see increases in the credit are 340,000 maids and housekeeping cleaners, 340,000 personal care and home health aides, 280,000 janitors and building cleaners, 250,000 nursing assistants, and 240,000 waiters and waitresses

The center estimates “hundreds of thousands of retail salespeople, child care workers, teaching assistants, food preparation workers, truck and delivery drivers, and others in low-paid occupations would receive a larger credit as well.”

To some progressives in Congress, the new tax breaks are far from enough. Five California Democrats voted against the tax bill, while all other state Democrats as well as all Republicans voted for it.

“This tax deal leaves way too many working- and middle-class households behind,” said Rep. Linda Sanchez, D-Norwalk, a member of the tax-writing House Ways and Means Committee.

Rep. Judy Chu, D-Pasadena., also a committee member, agreed that “significant work remains,” but noted that the bill will help lift hundreds of thousands of children out of poverty and increase benefits for lower-income families of 2 million children.