As the 2024 congressional session comes to a close, many states have done great things to help kids and families by making refundable tax credits bigger. Notably, Colorado, Illinois, New York, Utah, and the District of Columbia have all passed laws that make it easier to get and benefit from these credits.
The goals of these programs are to help families with money problems, make tax systems more fair, and make sure that all families, even those with the lowest incomes, can fully benefit from these programs.
Fully Refundable Credits
Two states and the District of Columbia have made sure that their tax credits can be totally refunded. This is one of the most important changes. In other words, households that are qualified will get the full amount of the credit, even if they owe money on state income taxes.
This design is especially helpful because it helps balance out the unfair nature of some taxes, like property and sales taxes. This makes Earned Income Tax Credits (EITCs) and Child Tax Credits (CTCs) better ways to promote financial equality.
State-Specific Initiatives
From the 2023 tax year on, Colorado’s Earned Income Tax Credit will be equal to 50% of the federal credit. The state also created the Family Affordability Tax Credit, which can give up to $3,200 per child during times of great economic growth. The current Child Tax Credit is boosted by this new credit, giving families even more help.
Illinois
Illinois has made changes to its Earned Income Credit for families with kids younger than 12. From 2024 on, the new child benefit will match the state credit at 40%, starting with 20% and building up over time. This move shows that Illinois wants to help families by giving them more money for college.
New York
It is now possible for children under 6 years old in New York to get a $420 tax credit. This credit is fully refunded. The Empire State Child Tax Credit will also get a one-time boost from the state in 2024. Lawmakers are also talking about the idea of combining the Empire State Child Credit and the EITC so that benefits can be better targeted to families with low incomes.
Utah
In a big change, Utah made its nonrefundable Child Tax Credit available to kids up to age four. It used to only be for kids up to age three. The goal of this extension is to help more families with young children.
District of Columbia
D.C. is going to add a new Child Tax Credit, which is another example of its move toward more progressive tax policies. This program is similar to ones being used in other states to help families in more serious ways.
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Broader Trends
These actions are part of a bigger trend among states to use tax credits to help families more. Since the government expansions under the American Rescue Plan Act ran out in 2022, states have been stepping up more and more to fill the gap. Since then, 12 states plus D.C. have either started or grown their CTCs, and 17 states plus D.C. have started or grown their EITCs. These changes show that more and more people are realizing how important these credits are for boosting economic security and lowering poverty.
Dependent Care Credits
Along with CTCs, another big change is the growth of Child and Dependent Care Credits (CDCTCs). Some of the costs of child care are covered by CDCTCs, which helps families handle the costs of care. This year, states like Kansas, Colorado, and Wisconsin have made their CDCTCs bigger, which means they can give more help.
CDCTCs and CTCs
CDCTCs and CTCs are both meant to help families, but they do so in different ways. CDCTCs pay families for paid child care costs, but they need to be able to afford child care in the first place. CTCs, on the other hand, give families a bigger tax return that they can use however they want, giving them more financial freedom.
Recent changes to laws in several states show that people are working together to help families, especially those with smaller incomes. States are trying to make things more fair and secure financially by increasing and improving tax credits. These changes are very important because they make sure that all families, no matter how much money they have, can get the help they need to do well.