Illinois lawmakers are mulling a bill that could offer a tax credit of up to $700 per child to hundreds of thousands of families throughout the state.
According to the bills, that tax credit would be based on income, but could help lift thousands of children out of poverty and help drive reductions in state aid payments to families because of the increase in net income they could see from the legislation.
So how would the tax credit work? Who would be eligible? Here’s what we know based on the text of the bills being considered, including HB 3950.
How the credit would be allocated
For families with children under the age of 18, they could claim an income tax credit of $700 per qualified dependent under the language of the legislation.
Taxpayers whose income is $50,000 or less, or $75,000 for those filing jointly, will receive the full amount, but those whose income is over those thresholds are still eligible.
In those cases, the maximum amount would be reduced by $24 for each $1,000 by which the taxpayer’s net income exceeds the listed thresholds.
Who would benefit from the tax credit?
According to a study published by the Illinois Economic Policy Institute and the Project for Middle Class Renewal at the University of Illinois, the bill as proposed would impact 840,100 households with children in the state, or roughly 60.4% of households with children.
More than 1.7 million children could be impacted, with a 7.6% reduction in childhood poverty according to the study.
How much would the tax credit cost the state?
According to the study, the total cost per year of the tax credit would amount to just under $1.1 billion.
Experts do say that at least some of the program’s cost would be offset by reductions in the amount of state aid paid out to those families, while also saving or creating nearly 7,800 jobs and enhancing business output by $1.5 billion, according to language of the study.
When would the credit go into effect?
According to language of the bill, if the law is passed it will go into effect immediately. It is unclear whether the measure could pass prior to this year’s tax return filing deadline of April 15, but if it does, parents would be eligible to claim the credit immediately.