The tax bill could help lift millions of families out of poverty. (iStock)
The House recently passed a $78 billion tax bill that would temporarily expand the child tax credit. The bill moves to the Senate next but has seen support from both Democrats and Republicans.
Currently, the tax credit is $2,000 per child but isn’t entirely refundable. The new bill would raise the refund amount to $1,800 for 2023 returns. The amount goes up to $1,900 for 2024 returns and $2,000 in 2025.
“Last night, I voted to pass a tax package that would expand the Child Tax Credit for 79,000 kids in Memphis and TN-9, lifting many of them out of poverty,” Congressman Steve Cohen said in a press release. “The bill would also increase the Low-Income Housing Tax Credit — which would benefit many families in my district and would help relieve the nationwide affordable housing crisis — and would restore the R&D tax deduction that incentivizes businesses to innovate and create real, local jobs.”
If passed in the Senate, the tax bill could initially help lift an estimated 400,000 children out of poverty and provide financial support to three million children and their families with low incomes.
As the credit refund limit rises, by 2025, more than half a million children will be lifted above the poverty line and about five million families currently living below the poverty line will receive more financial support.
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Standard deduction adjusted for inflation
Other tax changes are on the horizon this year, namely an increase in the standard deduction to keep up with inflation.
The IRS recently announced that single taxpayers and those married filing separately will see a $750 increase in their standard deduction, now $14,600 for 2024.
For married couples filing jointly, the standard deduction increases by $1,500 for 2024 to $29,200. Heads of households will also see their standard deduction go up by $1,100 to $21,900 for the 2024 tax year.
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Electric vehicle tax credit includes fewer vehicles this year
The $7,500 electric vehicle credit for new and used EV purchases has been limited to certain vehicles. Now just 13 vehicles qualify for the credit.
In an attempt to reduce the reliance on Chinese manufacturers, electric vehicles that use Chinese-made parts no longer qualify for the tax credit, according to the IRS.
For new EV purchases, qualifying vehicles will get the full $7,500 credit. Used vehicles purchased before or in 2023 qualify for up to $4,000. The car buyer must also not exceed certain income limits and must only use the car for personal use.
A few of the vehicles that still qualify for the tax credit include the Model Y Tesla, the R1T Truck, the NV’s Jeep Wrangler 4xe and the Ford F-150 Lightning truck.
“I do expect that this [list] will increase over time,” said Kate Whitefoot, an associate professor of engineering and public policy at Carnegie Mellon University. “That’s because it’s going to take time for automakers to set up the domestic battery and mineral supply chains necessary to meet the tax credit requirements — which are still relatively new.”
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