Personal Finance

How Harris’ running mate Tim Walz could shape the child tax credit

Published

7 months ago

August 6, 2024

Minnesota Gov. Tim Walz, seen in Washington, D.C., on July 3, 2024, and Vice President Kamala Harris, seen in Washington, D.C., on July 22, 2024.

Jim Watson, Chris Kleponis | AFP | Getty Images

How Minnesota’s child tax credit stacks up

Described by Walz as a “signature accomplishment,” Minnesota’s refundable child tax credit was $1,750 per child for 2023, which was the biggest in the country for low earners. The credit begins phasing out at $29,500 for single filers or $35,000 for married couples filing together. The complete phaseout depends on the number of children, family income and filing status.

“Minnesota’s new child tax credit is unusual in its narrowness,” said Jared Walczak, vice president of state projects at the Tax Foundation. “But it is the most generous in the nation for low-income households.”

For 2023, more than 215,000 Minnesota tax returns claimed the credit for over 437,000 eligible children with a total average tax break of $1,244 per child, Walz reported last week.

“This year, we invested directly in the financial security and well-being of families across the state through our nation-leading child tax credit,” he said in a press release.

For tax year 2024, eligible Minnesota families can soon choose to receive 50% of the credit before the tax season via advance payments. A similar policy was enacted for the federal child tax credit in 2021, which reduced the child poverty rate to a historic low of 5.2% that year, according to a Columbia University analysis.

How Walz could shape federal policy

As a key priority for Walz, Minnesota’s child tax credit upgrades were the single biggest line item in his latest supplemental budget. The policy could resurface to support an expanded federal child tax credit on the presidential campaign trail. But enacting federal changes could be more challenging, depending on which party controls Congress, experts say.

“It’s really hard to draw straight lines from any state policymaker to federal policymaking,” said Richard Auxier, a principal policy associate for the Urban-Brookings Tax Policy Center who focuses on state and local tax policy.

In Minnesota, the child tax credit was enacted via a Democratic-controlled state legislature, along with a significant budget surplus, which is different from the federal climate, he said.

Still, while Walz enacted state tax breaks like other governors, “he was able to turn the dial up a few extra notches,” Auxier said. “The child tax credit is probably the most obvious example.”

Walz’s office did not immediately respond to CNBC’s request for comment.

Kamala Harris picks Minnesota Governor Tim Walz as running mate

Despite bipartisan support for an expanded federal child tax credit, Senate Republicans blocked the measure earlier this month to defer negotiations.

Sen. Mike Crapo, R-Idaho, the ranking member of the Senate Finance Committee, in a statement described the vote as a “blatant attempt to score political points.” He said Senate Republicans have concerns about the policy, but are willing to negotiate a “child tax credit solution that a majority of Republicans can support.”

If enacted, the bill would have improved access to the child tax credit and retroactively boosted the refundable portion for 2023, which could have triggered refund checks from the IRS.

National Economic Advisor Lael Brainard said in a statement that President Joe Biden and Harris will “continue to fight for an expanded child tax credit.”

Personal Finance

Americans are suffering from ‘sticker shock’ — here’s how to adjust

Published

37 minutes ago

February 28, 2025

Business Finance News

A worker stocks eggs at a grocery store in Washington, D.C., on Feb. 12, 2025.

Tom Williams | CQ-Roll Call, Inc. | Getty Images

Whether it’s a dozen eggs or a new car, Americans are having a hard time adjusting to current prices.

Nearly all Americans report experiencing some form of “sticker shock,” regardless of income, according to a recent report by Wells Fargo.

In fact, 90% of adults said they are still surprised by the cost of some goods, such as a bottle of water, a tank of gas, dinner out or concert tickets, and said that the actual costs are between 55% and 200% higher than what they expected depending on the item.

Many Americans are still cutting back on spending, making financial choices and delaying some life plans, the Wells Fargo report also found. The firm polled more than 3,600 consumers in the fall.

“The value of the dollar and what it is providing may not be as predictable anymore,” said Michael Liersch, head of advice and planning at Wells Fargo. As a result, “consumer behaviors are shifting.”

Still, adjusting to a new normal takes time, he added: “Habit formation does take a while. Next year what you can imagine seeing is consumers being a little less surprised or shocked by prices and adapting to the current situation to create that goals-based plan.”

Some change is already apparent. Although credit card debt recently notched a fresh high, the rate of growth slowed, which indicates that shoppers are starting to lean less on credit cards to make ends meet in a typical month, according to Charlie Wise, TransUnion’s senior vice president of global research and consulting.

“After years of very high inflation, they are kind of figuring it out,” Wise said. “They’ve adjusted their baseline for what things cost right now.”

But with President Donald Trump‘s proposed 25% tariffs on imports from Canada and Mexico set to take effect in March, there is also the possibility that prices will rise even further in the months ahead.

Consumers fear inflation will pick up

Mexico and Canada tariffs could put pressure on some consumer staples, experts say. That includes already high grocery prices, which are up 28% over the last five years, according to the Bureau of Labor Statistics.

The prospect of tariffs and renewed inflation is weighing heavily on many consumers.

The Conference Board’s consumer confidence index sank in February, notching the largest monthly drop since August 2021. The University of Michigan’s consumer sentiment index similarly found that Americans largely fear that inflation will flare up again.

A recent CreditCards.com survey found that 23% of Americans expect to worsen or go into credit card debt this year, in part because they are making more purchases ahead of higher tariffs.

How to battle sticker shock

Consumer savings expert Andrea Woroch recommends setting a spending plan and tracking expenses. That helps you pinpoint wasteful purchases and those where prices are accelerating and take steps to save.

“Write out all your expenses currently from those essentials and the wants, figuring out an average monthly spend for fluctuating categories,” she said. “Once you have it all listed out, you can begin hacking away at unnecessary purchases or at least set goals for reducing in those nonessential categories.”

Identify triggers that lead to impulse purchases to help dodge them in the future, Woroch also said. “If you can’t resist a sale, then unsubscribe from store newsletters and turn off push notifications in deal apps.”

Ultimately, being more in control of your spending will “reduce the stress that comes with worry about how you’re going to afford higher prices,” Woroch said.

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Personal Finance

There’s still time to lower your 2024 taxes or boost your refund

Published

20 hours ago

February 27, 2025

Business Finance News

Pra-chid | Istock | Getty Images

With tax season well underway, you may be eager for strategies to reduce your 2024 taxes or boost your refund. However, there are limited options, especially for so-called “W-2 employees” who earn wages, experts say.

After Dec. 31, there are “very few” tax moves left for the previous year, according to Boston-area certified financial planner and enrolled agent Catherine Valega, founder of Green Bee Advisory.

Once the calendar year ends, it’s too late to claim a tax break by boosting 401(k) plan deferrals, donating to charity or tax-loss harvesting.

But there are a few opportunities left before the April 15 tax deadline, experts say. Here are three options for taxpayers to consider.

1. Contribute to your health savings account

If you haven’t maxed out your health savings account for 2024, you have until April 15 to deposit money and score a tax break, experts say.

For 2024, the HSA contribution limit is $4,150 for individual coverage or $8,300 for family plans. However, you must have an eligible high-deductible health insurance plan to qualify for contributions.

“The HSA is easy,” said CFP Thomas Scanlon at Raymond James in Manchester, Connecticut. “If you are eligible, fund it and take the deduction.”

2. Make a pre-tax IRA deposit

The April 15 deadline also applies to individual retirement account contributions for 2024. You can save up to $7,000, plus an extra $1,000 for investors age 50 and older.

You can claim a deduction for pre-tax IRA contributions, depending on your earnings and workplace retirement plan.

The strategy lowers your adjusted gross income for 2024, but the account is subject to regular income taxes and required withdrawals later, said CFP Andrew Herzog, associate wealth manager at The Watchman Group in Plano, Texas.

“A traditional IRA simply delays taxation,” he added.

A traditional IRA simply delays taxation.

Andrew Herzog

Associate wealth manager at The Watchman Group

3. Leverage a spousal IRA

If you’re a married couple filing jointly, there’s also a lesser-known option, known as a spousal IRA, which is a separate Roth or traditional IRA for nonworking spouses.

Married couples can max out a pre-tax IRA for both spouses, assuming the working spouse has at least that much income. It’s possible to claim a deduction for both deposits.

But whether you’re making a single pre-tax IRA contribution or one for each spouse, it’s important to weigh long-term financial and tax planning goals, experts say.

Personal Finance

Student loan applications down from Education Dept. website

Published

21 hours ago

February 27, 2025

Business Finance News

Students walk through the University of Texas at Austin on February 22, 2024 in Austin, Texas.

Brandon Bell | Getty Images

The Trump administration has taken down the applications for popular student loan repayments plans from the U.S. Department of Education‘s website, leaving millions of borrowers with fewer options for now.

Borrowers are unable to access the applications for income-driven repayment plans, as well as the online application to consolidate their loans.

Both applications are critical for borrowers pursuing lower monthly payments and loan forgiveness through an IDR plan, as well as the related Public Service Loan Forgiveness program.

The disruption is due to a recent decision by the 8th Circuit Court of Appeals that blocked the Biden administration’s new IDR plan, known as SAVE, or Saving on a Valuable Education, as well as the loan forgiveness component under other IDR plans.

Congress created IDR plans in the 1990s to make borrowers’ bills more affordable. The plans cap borrower’s monthly payments at a share of their discretionary income, and cancel any remaining debt after a certain period, typically 20 years or 25 years.

More than 12 million people were enrolled in the plans as of September 2024, according to higher education expert Mark Kantrowitz.

Here’s what to know about the changes.

Applications could be down for ‘a few months’

The IDR plan applications shouldn’t be down for too long, Kantrowitz said.

“I expect it will be temporary, lasting a few months while they make changes,” he said.

The Education Department is likely tweaking the applications to make sure all their plans comply with the new court order, as well as removing the SAVE plan all together.

The Education Department did not immediately respond to CNBC’s request for comment.

Betsy Mayotte, president of The Institute of Student Loan Advisors, a nonprofit, also didn’t expect a long wait time before the applications return.

“I get the sense the ED is working hard to get the changes made,” Mayotte said.

Impacts of the plans going dark

Unfortunately, there’s nothing federal student loan borrowers who want to sign up for an IDR plan or switch between the plans can do right now, Kantrowitz said.

Borrowers who are due to recertify their IDR plans will also have to sit tight for the time being, Mayotte said. (Those enrolled in IDR plans typically have to submit their income information annually.)

While the legal challenges against SAVE were playing out, the Biden administration put enrollees into an interest-free forbearance. That payment pause is likely to end soon, experts said. By then, borrowers should be able to access other IDR plans, though.

Those who graduate in the spring are typically entitled to a six-month grace period before their first bill is due, Kantrowitz pointed out.

As a result, they won’t need to sign up for a repayment plan until Novemember or December. The plans should be available again by then.

Options if you can’t afford your student loan bill

The disruption to IDR plans will be especially difficult for borrowers who can’t afford their current student loan bill and now can’t access a more affordable option, Mayotte said.

These borrowers can call their loan servicer and explain their situation.

You should first see if you qualify for a deferment, experts say. That’s because your loans may not accrue interest under that option, whereas they almost always do in a forbearance.