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Louis Jacobson
By Louis Jacobson January 3, 2013
Molly Moorhead
By Molly Moorhead January 3, 2013
← Back to Extend child tax credits and marriage-penalty fixes

Variety of child and family tax cuts extended or made permanent in fiscal cliff bill

In passing a tax bill to forestall the "fiscal cliff" -- the overnight rise of a wide array of taxes combined with deep spending cuts -- lawmakers agreed to extend tax cuts relating to children and marriage.

During the 2008 presidential campaign, Barack Obama promised to extend aspects of the tax cuts passed under President George W. Bush, including child credit expansions and changes to marriage bonuses and penalties.

We already rated this a Promise Kept after Obama signed legislation on Dec. 17, 2010, that continued those measures for another two years.

The fiscal cliff bill, passed by the House and Senate on Jan. 1, 2013, extends several tax credits, or portions of tax credits, for five years. These include:

Earned Income Tax Credit. Under current law, working families with two or more children currently qualify for an Earned Income Tax Credit equal to 40 percent of the family's first $12,570 in earned income. The stimulus set the rate at 45 percent for families with three or more children and made other adjustments. The fiscal cliff bill extends these provisions for five additional years, through 2017.

Child Tax Credit. The stimulus set a new threshold for refundability of the credit, and the fiscal cliff bill extends that for five years, though 2017. In addition, the fiscal cliff bill permanently extends changes made under President George W. Bush that increased the amount of the credit and expanded the terms of the refundability.

Marriage penalty. A "marriage penalty" describes what happens when a couple pays more income tax if they file jointly as a couple than they would if they had remained single and filed as individuals. The fiscal cliff bill permanently extended marriage penalty relief for the standard deduction, the 15 percent bracket, and the Earned Income Tax Credit.

Dependent Care Credit. The dependent care credit benefits taxpayers who have child care expenses for children under 13 and disabled dependents. Under Bush, the amount of eligible expenses was increased. The fiscal cliff bill makes those changes permanent.

Adoption tax credits. Taxpayers who adopt children can receive a tax credit for adoption expenses and can exclude adoption expenses paid by an employer from the calculation of their income. Under Bush, the terms of this credit became more generous, and under Obama's health care law, these benefits were extended and the credit was made refundable. The fiscal cliff bill extends these provisions permanently.

We rate this a Promise Kept.

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