The ripple effects of changes to the child tax credit
MADISON, Wis. (WMTV) - Tax season begins January 24th, and due to legislation failing to pass in Congress, the child tax credit is again going to change.
The American Rescue Plan adjusted the credit in 2021. The plan changed the $2,000 credit per dependent under the age of 17 to $3,000. It also allowed monthly payments instead of one lump credit on a tax return.
“What we’re seeing is that families, especially families with a tighter bottom line, were using that money for household expenses,” said Sarah Halpern-Meekin, an associate professor for UW-Madison’s school of human ecology.
And if no new legislation is passed, Lynne Mason, a partner at Exact Accounting and Financial Services in Madison, says it could drastically impact the tax return families are banking on for some extra money.
“There may be some scenarios this year where parents got too much money this year and they may have a very small refund if no refund,” said Mason.
And it comes at a time when inflation is driving the cost of living up.
Halpern-Meekin added that while any portion of the upcoming tax return could help, the long-term impacts for families across Madison, the state, and the country are grimmer.
“In December alone, 3.7 million children were lifted out of poverty in the United States,” said Halpern-Meekin. “So we know, as that money goes away, many of those children will go back under the poverty line.”
She added that it is best to start early with your return. You can go on the IRS website and search VITA for the volunteer income tax assistants in your area.
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