The House GOP released details of President Donald Trump’s proposed tax agenda on Monday, a long-anticipated 300-plus page package known as ‘one big, beautiful bill.’
At the centerpiece of the legislative tax proposal is making Trump’s 2017 Tax Cuts and Jobs Act (TCJA) permanent. But the House Ways and Means Committee also aims to increase the federal Child Tax Credit (CTC) from $1,000 to $2,500 through 2028, and set the credit to $2,000 for subsequent tax years. The measure would add a requirement for recipients to have a Social Security number.
Under the proposal, the maximum amount of the refundable portion of the child tax credit wouldn’t exceed $1,400 per qualifying child, subject to inflation. The TCJA temporarily raised the CTC from $1,000 per child to $2,000 through 2025. For the 2024 tax year (returns just filed in April), eligible families could receive a refundable credit worth up to $1,700.
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No further details were provided in the draft legislation regarding changes to the structure of the child tax credit.
Currently, children in families with annual earnings of $2,500 or less are ineligible for the refundable portion of the credit. That’s 17 million children in low-income households who receive no credit or just a partial credit due to income limits — and it appears it may stay that way.
The Republican-controlled chamber reportedly wants to move the measure through the House and Ways Committee by Memorial Day, May 26. The bill stands to cut taxes by more than $4 trillion and reduce spending by at least $1.5 trillion over a decade.
Here’s what policy analysts are saying about Trump’s proposed child tax credit expansion.
How much is the new child tax credit?
If the Republican-controlled Congress doesn’t pass a legislative tax package, the child tax credit will revert to $1,000 per child under 17 after the end of the year.
Some of the main changes for the CTC under the House GOP proposal include:
- Increasing the full child tax credit amount to $2,500 per child through 2028.
- Setting the full credit amount to $2,000 for subsequent tax years.
- Applicants must have a Social Security number to qualify for the credit.
The Tax Policy Center projects that this plan would provide an additional $22.9 billion of CTC benefits to families with children in 2026. However, the plan would mainly benefit middle- and higher-income households who, after receiving $2,000 in CTC — still owe additional income taxes.
By the numbers, analysts expect that increasing the CTC to $2,500 per child would:
- Increase the credit by up to $800 for some middle- and higher-income families, meanwhile;
- Low-income beneficiaries would receive an average increase of the benefit equal to about $350, or half the amount compared to folks with higher incomes.
Child tax credit 2025 amount
As it stands, eligible families can claim a federal child tax credit worth up to $2,000 per child under 17. If the credit surpasses your tax liability, you can receive some or all of the difference as a refundable credit.
- The refundable portion of the CTC (known as the Additional Child Tax Credit or ACTC) is worth 15% of a family’s earnings above $2,500, up to a maximum of $1,700 per child for tax year 2024.
- The credit phases down once a household income surpasses $200,000 for single parents or $400,000 for married couples.
Additionally, the TCJA included a $500 nonrefundable credit for families with older children and adult dependents, which was subject to the same CTC phased-out rules. This is known as the “Other Dependent Tax Credit” or ODCT.
The released legislative proposal didn’t include details on whether the phase-in and phase-out requirements for the child tax credit would change. Nor did it mention the continuity of the ODCT.
‘Leaving low-income children out’
While the framework of the House proposed tax package increases the value of the child tax credit above $2,500 per child, tax policy analysts warn that millions of children are left forgotten.
The failure to make changes to the structure of the credit would “largely leave low-income children out,” according to an analysis by the Tax Policy Center. Some 17 million children, or 1 in 4, would continue to receive less than the full tax credit or no credit at all due to their family’s income.
As noted, families who earn less than $2,500 effectively receive no credit under the CTC. That’s because if a family owes little or no federal income tax, the nonrefundable credit might not benefit them. (At that income level, it only reduces tax liability to zero and doesn’t generate a refund.)
The current structure of the credit phases in at a rate of 15 cents for each dollar, regardless of the number of qualifying children in the family.
If approved, the House proposal would increase the full credit amount to $2,500 per child. However, the increase would result in no change at all for millions of children in low-income working families.
- The poorest 20% of families with children would receive just 2% of the new CTC benefits.
- The top 20% of families with children would get nearly 10 times as much in new CTC benefits, according to the Tax Policy Center.
(Image credit: Tax Policy Center)
What happens if the GOP tax bill fails?
If Congress ultimately fails to pass the tax legislation, beginning next year, the child tax credit would revert to pre-TCJA levels: $1,000 per child.
- The credit would phase down for single parents once their income reaches a limit of $75,000, or $110,000 for married couples.
- Families with a tax liability under $1,000 per child can still receive a tax refund, equal to 15% of your income over $3,000 up to a maximum amount of $1,000 per child.
Lastly, the ODCT would expire as it was a temporary provision under the TCJA.
As the Republican-led Congress moves forward with their tax plan, advocates of the CTC like founder and former president of the Center on Budget and Policy Priorities (CBPP) Robert Greenstein, warns there are still ways to improve the child tax credit framework.
“Depending on how such changes are crafted, they could either help children in lower-income working families or bypass them while favoring children in families higher on the income scale, with incomes of up to half a million dollars a year,” wrote Greenstein for the Brookings Institution.
House Republicans reportedly plan to pass their version of Trump’s major tax breaks bill by the Fourth of July. Stay tuned to our coverage to see how those changes will impact you and your family.
