States Take Child Tax Credits Into Their Own Hands

“What now?” is a query many households are asking, particularly those that started receiving expanded baby tax credit on the federal degree solely to see them not be renewed by Congress on the finish of final 12 months.

The short-term financial and societal advantages of the federal authorities’s expanded 2021 baby tax credit score laws has not gone unnoticed by state legislators. In truth, the profitable affect of the federal authorities’s expanded baby tax credit score for 2021 has motivated numerous states to enact comparable tax aid for eligible households. An ever-expanding listing of states look like taking issues into their very own arms as they enact (or amplify) laws geared toward creating tax financial savings for households who might have them essentially the most.

Increasingly more state lawmakers are advocating tax aid measures for his or her constituent resident households. Tax aid, for many collaborating states, is taking the type of a state-level baby tax credit score that dietary supplements any eligible baby tax credit score the household qualifies for on their federal return. Due to this fact, from a planning perspective, it is very important pay attention to:

1. which states are implementing baby tax laws
2. who qualifies
3. how a lot tax aid could be anticipated

Tax Yr 2021 – Evaluate of the Expanded Baby Tax Credit score

Many households have already filed their 2021 tax returns. Nonetheless, households who’ve but to file, have till October 15 to profit from the federal American Rescue Plan’s expanded baby tax credit score for tax 12 months 2021. Beneath is a abstract of these federal tax legislation enhancements:

• Elevating the eligibility age of kids by one 12 months, to incorporate kids as much as age 17
• Growing the credit score whole from $2,000 per baby to $3,000 per baby, for kids ages 6 to 17
• Growing the credit score by $600 (as much as $3,600 per baby) for kids below age 6
• Permitting the kid tax credit score to be totally refundable

Previous to 2021, a really restricted variety of states provided any kind of kid tax credit score aid for households. The success of the 2021 federal baby tax credit score enhancements generated elevated state policymaker consideration. Because of this, the listing of states who’ve enacted some part of kid tax credit score aid has continued to swell over the previous couple of years. Some states have already instituted tax legislation adjustments which piggy-back off the federal baby tax credit score adjustments whereas different states have opted to enact tax legislation adjustments which might be much less instantly related to federal legislation.

Mapping It Out

To this point, the next states have enacted laws that gives some degree of kid tax credit score aid for 2022 and/or years thereafter, both within the type of a refundable or non-refundable state tax credit score:

The quantity of the kid tax credit score, in addition to eligibility of who qualifies for tax aid, can range extensively from state to state.  A assessment of the collaborating states reveals a broad spectrum of tax submitting circumstances wherein households can get hold of state baby tax credit score help. For essentially the most half, states are focusing their baby tax credit score eligibility on revenue ranges; nonetheless, the revenue thresholds for qualification are virtually as numerous as the quantity of the credit score itself.

For instance, Maryland has an earnings restrict (amongst different necessities) as little as $6,000 whereas Connecticut permits for an revenue degree as excessive as $200,000 for married submitting joint {couples}. Likewise, the quantity of the kid tax credit score itself can range by state as effectively. In some cases, the credit score could be a share of the federal baby tax credit score and refundable (i.e., Colorado, New York) or non-refundable (Oklahoma). Different states could solely present a hard and fast baby tax credit score and permit it as refundable (Vermont) or non-refundable (Idaho).

Tax Legislation Change Challenges

The problem for practitioners is to not solely be conversant in the states having already enacted baby tax credit score laws however to additionally pay attention to the extra states who’re contemplating it. Some states could find yourself enacting new laws later this 12 months, simply in time to affect the 2022 tax submitting season. States at present considering baby tax credit score (or deduction) enhancements embrace Illinois, Michigan, North Carolina and Rhode Island.

For sure, the kid tax credit score continues to be an evolving space of tax legislation for a lot of states. This seems to be the route states are shifting regardless of the actual fact an extension of the federal authorities’s 2021 expanded baby tax credit score doesn’t look like possible within the foreseeable future.