Under the Tax Cuts and Jobs Act, for the 2018-2025 tax years (other than 2021), the Child
Tax Credit (CTC) is $2,000 per qualifying child. After 2025, it is set to drop back down to $1,000 per qualifying child. A “qualifying child” is one who is under age 17 at the end of the tax year and for whom a taxpayer is allowed a dependency deduction. The Child Tax Credit (CTC) is also partially refundable for certain taxpayers. For tax years 2018-2025, the refundable credit per qualifying child can’t exceed $1,400, as adjusted for inflation. After 2025, the $1,400 limit and inflation adjustment won’t apply. In addition, refundability is currently limited to 15% of a taxpayer’s earned income over $2,500, with an alternate calculation for families with three or more children. In 2026, the earned income threshold will be $3,000 regardless of the number of children for which the Child Tax Credit (CTC) is claimed. For 2021, the Child Tax Credit (CTC) was temporarily increased to $3,600 per child under six and $3,000 per child aged six to 17. It also was provided via monthly payments and made fully refundable. This year’s legislative proposals: Other related proposals on the menu include eliminating head of household status and restructuring the Earned Income Tax Credit into a “worker credit” and “child credit.”
But as we await the unveiling of a broad tax reform bill, there’s been no shortage of single-issue bills to revise the Child Tax Credit (CTC) — despite Congress having convened just a month ago. These varied proposals show that there isn’t yet agreement even within the Republican party — which is expected to drive the 2025 tax reform efforts — on the size and refundability of the deduction.
In a broad proposal to extend Tax Cuts and Jobs Act expiring provisions, the TCJA Permanency Act, Representative Vern Buchanan (R-FL) is calling for a $2,000 annual credit per qualifying child. Buchanan’s proposal requires that the child’s Social Security be included on the tax return and would provide for partial refundability.
Representative Blake Moore (R-UT) is calling for more than just an extension of the CTC. His proposal would provide for a generous expansion — $4,200 for families with children under six, $3,000 for families with children age six to 17, and $2,800 for pregnant mothers. Families would need to earn at least $20,000 to receive the full credit (or $10,000 for pregnant mothers) under the bill. Moore would allow families to claim the credit for up to six children each year and require that both a parent and claimed child have a Social Security number.
One Democrat-led bill would reinstate a feature of the 2021 version of the CTC —providing monthly payments to families. Under Representative Emilia Sykes’ (D-OH), payments would be $350 per month for children under age six, and $300 per month for children over six. Sykes is also proposing an expanded Earned Income Tax Credit.
With so many options on the table, it’s unclear what the CTC will look like in 2026 and when we will know more.