Tax doesn't have to be taxing.so why is it?
This guide looks at the latest news in regard to Child Tax Credits and Universal Credit.
The House approves changes to Child Tax Credit
Last week, the Child Tax Credit Improvement Act was approved by the United States House of Representatives. The house cleared this bill by a vote of 237-173.
As per the present law, parents can claim a Child Tax Credit of up to $1,000 per child. The credit is available to every child, under the age of 17, of any federal taxpayer. In 2012, this credit was claimed by around 37 million taxpayers, who saved roughly $57 billion in taxes. There's also a refundable portion of this credit, which is available to low-income families that do not have any federal tax liabilities.
In its present form, unmarried individual taxpayers with income of up to $75,000 can claim this credit. However, for married couples, the credit is only available for couples with joint earnings of under $110,000. If filing individually, each married individual can claim this credit only if they are earning less than $55,000. This way, there's a so-called married penalty, which does not favor married couples or individuals.
The new proposal aims to address this as well as other challenges. Here are new proposed changes:
- Link the $1,000 per child credit to inflation - this should help parents in keeping up with increased living costs.
- Allow married couples with incomes up to $150,000 a year to claim the credit (as opposed to the earlier limit of $110,000). This way, a lot more families can benefit from the credit.
- Make the additional tax credit (refundable part) available only to legal residents. For this purpose, in addition to the Taxpayer Identification Number, the proposal is demanding applicants to provide their Social Security Number. According to Republicans, this will help control tax fraud as this will lower the number immigrants claiming the credit.
However, this act may not become law as democrats are opposing it in the Senate and the White House. They claim this act will deprive lots of children, whose parents are immigrants, from this credit and push them into poverty. And they have raised questions on the bill being silent on the refundable portion of the credit, which is set to expire in 2017.
The cost of this proposal, if approved, will be $115 billion in foregone earnings to the US government.
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