Child Tax Credit Shield Passed in Alabama Enabling Families to Save $200

Taxpayers in Alabama could save as much as $200 per family after lawmakers passed a child tax credit shield that will not count as taxable income when they reconcile their taxes with the Internal Revenue Service (IRS) this April.

HB231, sponsored by Rep. Jim Carns, was unopposed during the Alabama Senate and Alabama House of Representatives session on Thursday, February 17. The measure is now with the office of Gov. Kay Ivey, who is expected to approve this law.

"She looks forward to receiving the bill and putting money back into the hands of hardworking Alabamians," the spokesperson for the governor told Al.Com.

What the Child Tax Credit Shield Means for Alabama Taxpayers

According to Carns, unlike other states in America, Alabama and Louisiana do not have an automatic system that makes the child tax credit, distributed by the federal government from July to December 2021, tax-free. This means that when taxpayers file their tax returns on or before April 18, 2022, the money they received as child tax credit payments will count as income tax.

This legislation, however, excludes child tax credit payments from the computation of the parents' taxable income. Sen. Dan Roberts, who sponsored a version of the bill in the Senate, said that this means a family with two children may get up to $200 in credit exemption.

More than 560,000 families in Alabama received child tax credit payments last year, which went to expenses for food, rent, utilities, mortgage, and clothing. Carns said that it was crucial not to overlook this measure as it fulfills the actual intent of the American Rescue Plan, which was to provide relief for families during a pandemic crisis.

Carns also said that Alabama residents who filed their taxes earlier should contact the Department of Revenue to correct their tax returns to include this new tax shield. He believes, however, that most taxpayers won't file until April 15, leaving them enough time to get their tax numbers in order until the governor signs this bill into law.

Struggling Without Child Tax Credit

Meanwhile, a recent survey from Parents Together Action showed that 60 percent of parents struggled with their budget after the monthly child tax credit payments stopped in December. Allison Johnson, the director for the campaign, said that families living on an annual $100,000 income had been hit harder with the perfect storm of no more child tax credits, skyrocketing grocery prices, and consistently high virus transmission, especially among kids.

Parents Together Action has been lobbying Congress to bring back the monthly and enhanced version of the child tax credit. This time, the bill to renew this benefit under the Build Back Better program of the Biden administration has stalled among lawmakers.

On the other hand, the government is encouraging parents to file their tax returns because the other half of the child tax credit payments will still be released in a lump sum this tax season if they still qualify.