LITTLE ROCK (KATV) — The United States Congress is set to decide on a bill that would help families receive a higher child tax credit.
The Tax Relief for Working Families recently passed through the House of Representatives and is still to be voted on by the Senate.
If passed, families would get increased credit for the 2023-2025 tax years.
According to the Center on Budget and Policy Priorities, if it’s passed, more than 80,000 children living in rural areas of Arkansas would benefit from the tax expansion credit within the first year.
“Right now, the maximum refundable credit is $1,600 per child,” explained Joyia Yorgey, with Arkansas Asset Builders, “So that amount of refundable credit would be increased to $1,800, for the current tax year, $1,900, next year, and $2,000.”
Yorgey said the change in the law would make the changes retroactive for the 2023 tax return.
“The IRS would have some work on their hands to recalculate people’s tax refunds and provide additional refunds to households potentially based on an updated calculation,” Yorgey said.
She reflected on the pandemic years and noted that families, regardless of income were able to receive an advanced credit of up to $36,00 per child.
“People in the tax world and advocacy world saw what a difference it made on the household finances of those families, especially families with very low and moderately low incomes,” Yorgey said.
Yorgey said the problem with the child tax credit as it stands now, is that many very low-income families can’t get the full benefit out of it.
“A household only earning $13,000 has no tax liability whatsoever, so they’re relying only on the portion of the credit that can be paid back the refundable portion,” Yorgey explained.
However, she said a family who earns a higher income does have a tax liability, so they’ll have money that will come back to them.
Yorgey noted that increases to the child tax credit or any credits have a trickle-down effect on the entire community.
“It has about a 1.5% multiplier in the economy, so $1, that is received by household ends up creating $1.50 of business and wages and people buying and selling things and increase in our local economy when people use that tax refund, to make ends meet,” Yorgey said.