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Senate Bill 294 (SB 294) increases the Child Income Tax Credit for children under the age of six by doubling the amount of the credit provided to taxpayers. The bill retains the income-based credit structure while ensuring that families with young children receive additional financial support. The bill applies to taxable years beginning on or after January 1, 2025.Legislation Overview:
Senate Bill 294 (SB 294) amends Section 7-2-18.34 NMSA 1978, which provides the Child Income Tax Credit, by doubling the credit amount for qualifying children under age six. The bill maintains the current income brackets for eligibility but multiplies the credit amount by two for younger children. The tax credit is fully refundable, ensuring that low-income families receive the full benefit even if their tax liability is less than the credit amount. The bill also retains annual inflation adjustments, ensuring that the credit keeps pace with rising costs. Implications SB 294 provides substantial tax relief to families with young children, particularly low- and middle-income households. By doubling the credit for children under six, the bill acknowledges the higher costs associated with early childhood expenses, such as childcare, medical care, and early education. The full refundability of the credit ensures that families in lower income brackets receive maximum financial support, even if their tax liability is minimal. The increase in tax credits will reduce state income tax revenue, but the economic benefits of improved child welfare and family financial stability may offset some of the fiscal impact. The inflation adjustment provision ensures that the credit remains effective over time, preventing erosion of its value due to cost-of-living increases.Current Law:
Under current law, the Child Income Tax Credit applies to all qualifying children, but there is no increased benefit for children under six. SB 294 introduces a tiered structure, increasing the credit for younger children, while keeping the existing framework in place for older children.