What would the new child tax credit offer if it passes?

At the end of January, the House of Representatives passed a bill that would expand the federal Child Tax Credit. To get enacted, the bill still needs to pass the Senate, where it is "not guaranteed to win" approval, said The New York Times. But if it does secure Senate approval, the bill would "make the program more generous, primarily for low-income parents, as soon as this year," said The Washington Post.

However, while this new bill would represent an expansion of the existing child tax credit, it "isn't a return to the pandemic-era Child Tax Credit," when Congress "raised the benefit and made it fully refundable, even to those who didn't owe taxes," said The Wall Street Journal.

What's different about the new child tax credit?

The biggest shift in the expanded child tax credit would be for lower-income families, particularly those who have multiple children. "Under the current version, the child tax credit phases in for lower-income families at the same rate no matter how many children are in the family," meaning that a "married couple making $12,500 a year is eligible for a credit of $1,500, whether they have one child or three," said the Post.

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But "under the expansion, the maximum amount a lower-income family can receive is multiplied by the number of children in the family," which would translate to a married couple earning $12,500 a year being "eligible for a credit of $1,500 if they had one child, $3,000 if they had two children, $4,500 if they had three children, and so on," said the Post.

Additionally, the expanded Child Tax Care Credit would increase the maximum tax refund amount you could receive "if you don't owe taxes or you are getting a refund," said CBS News. Currently, the maximum refundable amount is $1,600, but "under the provision, the maximum refundable amount per child would rise to $1,800 in 2023, $1,900 in 2024 and $2,000 in 2025."

Starting in 2024, it also would be possible under the expanded child tax credit to use income from "either the current or prior year in calculating the [child tax credit], which is helpful if their income drops and they can't qualify for the tax credit," added CBS News.

How much would the new child tax credit be?

"The current $2,000 per child credit would remain as is for many taxpayers," said the Journal, as that would be the maximum tax credit offered per child for tax year 2023 or 2024. However, the deal would "index the child tax credit to inflation for the first time, so most parents would benefit from a boost of about $100 on their tax returns in 2025," said The Post.

Who would qualify for the new child tax credit?

"Taxpayers who are currently eligible for the current tax credit would continue to be eligible," said the Post. Families who earn less than $2,500 per year would continue to be ineligible for the credit, as that income threshold is required to qualify "even in part for the child tax credit.”

Changes in eligibility would apply to low-income families, who "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," said the Post.

What's next for the bill?

Next up, the bill heads to the Senate, where Majority Leader Chuck Schumer (D-N.Y.) "hopes to bring it to the floor, though some Republicans have voiced concerns," The Times said. "It is unclear whether Congress will approve the agreement, despite the bipartisan support in the House," said the Post.

If the bill does pass, it would need to happen in the "next several weeks" for the new benefit to "take effect in time for the upcoming tax filing season," said the Post. Should Congress fail to pass the bill or extend earlier increases to the child tax credit, the "maximum size of the credit will return to $1,000 per child" in 2026.