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Harris calls for child tax credit of up to $6,000 for newborn children

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U.S. Vice President Kamala Harris speaks at an event with U.S. President Joe Biden (not pictured) in Prince George’s County, Maryland, U.S., August 15, 2024. 

Elizabeth Frantz | Reuters

Vice President Kamala Harris on Friday unveiled an economic plan, including an expanded child tax credit worth up to $6,000 in total tax relief for families with newborn children.

The Democratic presidential nominee’s plan aims to restore the higher child tax credit enacted via the American Rescue Plan in 2021, which provided a maximum credit of up to $3,600 per child, according to a fact sheet from the campaign.

The 2021 credit was up to $3,000 or $3,600, depending on the child’s age and family’s income. Harris’ proposed tax break would increase for middle- to lower-income families for one year after a child is born.

“We will provide $6,000 in tax relief to families during the first year of a child’s life,” said Harris during a policy speech in Raleigh, North Carolina.

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The plan comes less than one week after Sen. JD Vance of Ohio, former President Donald Trump‘s GOP running mate, floated a $5,000 child tax credit

A Trump campaign official told CNBC: “Trump will consider a significant expansion of the child tax credit that applies to American families.”

While Harris has followed President Joe Biden’s footsteps with her proposed child tax credit expansion, the $2,400 bonus for newborns is “different and somewhat surprising,” said Kyle Pomerleau, senior fellow and federal tax expert with the American Enterprise Institute. “That, to me, sounds very much like a response to JD Vance.”

The Harris campaign did not immediately respond to CNBC’s request for comment.

‘Bipartisan momentum’ for the child tax credit

Senate Republicans earlier in August blocked an expanded child tax credit that passed in the House with broad support. However, Republican lawmakers are expected to revisit the measure after the election.

“There is bipartisan momentum behind expanding the [child tax credit],” said Andrew Lautz, associate director for the Bipartisan Policy Center’s economic policy program.

There is bipartisan momentum behind expanding the [child tax credit].

Andrew Lautz

Associate director for the Bipartisan Policy Center’s economic policy program

The size of the expansion and future credit design will hinge on which party controls the White House and Congress. But the House-passed bill and Senate negotiations could be a starting point, Lautz said.

Future child tax credit expiration

Without action from Congress, the maximum child tax credit will drop from $2,000 to $1,000 once Trump’s 2017 tax cuts expire after 2025.

The American Rescue Plan temporarily increased the maximum child tax credit from $2,000 to either $3,000 or $3,600, depending on the child’s age. Families received up to half via monthly payments for 2021.

The child poverty rate fell to a historic low of 5.2% in 2021, largely due to the credit’s expansion, according to a Columbia University analysis.

If there’s a future child tax credit expansion, Pomerleau doesn’t expect it to be as large as the tax break that Harris or Vance have proposed.

Amid the federal budget deficit, lawmakers are already wrestling with trillions in expiring tax cuts that are “prohibitively expensive,” he said.

Expanding the child tax credit to $3,000 or $3,600 could cost an estimated $1.1 trillion over a decade, according to the Committee for a Responsible Federal Budget. Meanwhile, the expansion to $6,000 for newborns could cost $100 billion.

The Harris campaign’s economic plan fact sheet said she would fulfill her “commitment to fiscal responsibility,” including calls for higher taxes on wealthy Americans and large corporations.

Kamala Harris' economic plan so far is aimed squarely at household costs: Brookings' Ben Harris

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Why your paycheck is slightly bigger

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Why your take-home pay could be higher

If you’re starting 2025 with similar wages to 2024, your take-home pay — or compensation after taxes and benefit deductions — could be a little higher, depending on your withholdings, according to Long.

“When all the tax brackets go up, but your salary stays the same, relatively, that puts you on a lower rung of the ladder,” he said.

The federal income tax brackets show how much you owe on each part of your “taxable income,” which you calculate by subtracting the greater of the standard or itemized deductions from your adjusted gross income.

“Even if you make a little more than last year, you could actually pay less in tax in 2025 compared to 2024,” because the standard deduction also increased, Long said. 

For 2025, the standard deduction increases to $30,000 for married couples filing jointly, up from $29,200 in 2024. The tax break is also larger for single filers, who can claim $15,000 in 2025, a bump from $14,600.  

‘It ends up nearly balancing out’

Tax Tip: 401(K) limits for 2025

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Student loan payments could lead to a tax break

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There’s one upside to your student loan payments: They might reduce your 2024 tax bill.

The student loan interest deduction allows qualifying borrowers to deduct up to $2,500 a year in interest paid on eligible private or federal education debt. Before the Covid pandemic, nearly 13 million taxpayers took advantage of the deduction, according to higher education expert Mark Kantrowitz.

Most borrowers couldn’t claim the deduction on federal student loans during the pandemic-era pause on student loan bills, which spanned from March 2020 to October 2023. With interest rates on those debts temporarily set to zero, there was no interest accruing for borrowers to claim.

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But interest on federal student loans began accruing again in September of 2023, and the first post-pause payments were due in October of that year.

By now, borrowers could again have interest to claim for the full tax year’s worth of payments, experts said.

“All borrowers should explore whether they qualify for the deduction as it can reduce their tax liability,” said Betsy Mayotte, president of The Institute of Student Loan Advisors, a nonprofit that helps borrowers navigate the repayment of their debt.

Student loan interest deduction worth up to $550

The student loan interest deduction is “above the line,” meaning you don’t need to itemize your taxes to claim it.

Your lender or student loan servicer reports your interest payments for the tax year to the IRS on a tax form called a 1098-E, and should provide you with a copy, too.

If you don’t receive the form, you should be able to get it from your servicer.

Depending on your tax bracket and how much interest you paid, the student loan interest deduction could be worth up to $550 a year, Kantrowitz said.

There are income limits, however. For 2024, the deduction starts to phase out for individuals with a modified adjusted gross income of $80,000, and those with a MAGI of $95,000 or more are not eligible at all. For married couples filing jointly, the phaseout begins at $165,000, and those with a MAGI of $195,000 or more are ineligible.

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Op-ed: Here’s why estate planning is a gift for your family

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Estate planning isn’t about focusing on your demise, one advisor says; it’s about taking control and making decisions that ensure your loved ones are cared for.

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