Enhanced Child Tax Credit Will Revert to Original $2,000 for 2022
In 2021, President Joe Biden enacted the American Rescue Plan Act (ARP), which expanded the Child Tax Credit (CTC) significantly for one year, making it the largest U.S. child tax credit ever and providing most working families with $3,000 per child under 18 years of age and $3,600 per child six and younger.
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The plan also made the credit fully refundable and provided tax credit options for families to take half the credit in six monthly payments. Between July 15 and December 31, 2021, 39 million households with 65 million children — 88% of children in the United States — automatically received monthly payments of between $250 and $300.
However, the Child Tax Credit was enhanced for just one year and without further expansion or adoption of Biden’s Build Back Better framework this year, the advanced credit will revert from $3,600 per eligible child to its original maximum amount of $2,000. Changing back to the pre-2021 CTC policy will have a significant impact on families, many of whom are already struggling to provide basic needs for their children.
With ever-rising costs for food, gasoline, housing and other necessities squeezing consumers and threatening the economy, many low-income families will be hit particularly hard. By cutting the CTC, as of January 2022, 3.7 million children were put back in poverty, GOBankingRates reported.
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The future of the enhanced Child Tax Credit remains undecided. Whether Biden can extend the enhanced CTC for 2022 depends on the voting outcome of a new Build Back Better-type bill. Regardless of Republican votes, getting a new bill passed through the Senate Democratic caucus won’t be easy. A reworked bill will need approval from all 50 democratic members and Sen. Joe Manchin (D-W.V.) has made it clear he is not a supporter of the enhanced CTC without income criteria and will not vote for the “sweeping” Build Back Better Act in its current form. Sen. Mitt Romney (R-Utah) has proposed another version of the credit, with work requirements, that could find bipartisan support.