About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

1 1 (November 14, 2017)

handle is hein.crs/govcgxq0001 and id is 1 raw text is: 01;0i E.$~ & p\w gnom ggmm mppm qq\ , q I aS 11LIANJILiN, November 14, 2017 Key Issues in Tax Reform: The Child Tax Credit The child tax credit (CTC) allows a taxpayer to reduce their federal income tax liability by up to $1,000 per qualifying child. A family with four qualifying children, for example, is eligible for a credit of up to $4,000. If the value of the credit exceeds the amount of tax a family owes, the family may be eligible to receive a full or partial refund of the difference. The total amount of their refund is calculated as 15% (the refundability rate) of earnings that exceed $3,000 (the refundability threshold), up to the maximum amount of the credit. The refundable portion of the child tax credit (the portion that exceeds a taxpayer's income tax liability) is referred to as the additional child tax credit, or ACTC. Low- and moderate-income taxpayers may receive all or some of the child tax credit as the ACTC. The credit phases out for higher-income taxpayers. For married couples filing jointly, the credit begins to phase out when income exceeds $110,000; for most other taxpayers, this threshold is $75,000. It takes $20,000 of income above each threshold to phase out $1,000 of the tax credit. Hence, a married couple with one qualifying child will be ineligible for the credit if their income exceeds $130,000. If they have two qualifying children, they will be ineligible for the credit if their income exceeds $150,000. Currently, the maximum credit per child, refundability threshold, and phase-out thresholds are not indexed for inflation (Nil). Table 1 provides an overview of key provisions of the child tax credit under current law. Table I. Parameters of the Child Tax Credit Parameter Current Law Max Credit Per Child $1,000 (Nil) Max Refundable Credit Per $1,000 (N l) Child Refundability Threshold $3,000 (NIl) Refundability Rate 15% Phase-Out Threshold $75,000 unmarried (NAI) $110,000 married* (NAI) Phase-Out Rate 5% Source: Internal Revenue Code, 26 U.S.C. §24. Notes: NIl = not indexed for inflation. * = married filing jointly. child on their federal income tax return. Valid TINs include individual taxpayer identification numbers (ITINs) and Social Security numbers (SSNs). ITINs are issued by the Internal Revenue Service (IRS) to noncitizens who do not have and are not eligible to receive SSNs. ITINs are supplied solely so that noncitizens are able to comply with federal tax law, and do not affect immigration status. The child tax credit was enacted as part of the Taxpayer Relief Act of 1997 (P.L. 105-34). When it initially went into effect in 1998, the credit was a $500-per-child nonrefundable credit, which primarily benefited middle- and upper-middle-income families. Since enactment, various laws have modified key parameters of the credit, expanding the availability of the benefit to more low- income families while also increasing the amount of the tax credit. The first significant change to the child tax credit occurred with the enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA; P.L. 107-16). EGTRRA increased the amount of the credit over time to $1,000 per child and made it partially refundable under the earned income formula. In 2008 and 2009, Congress passed legislation the Emergency Economic Stabilization Act of 2009 (EESA; P.L. 110-343) and the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5) that further expanded the availability and amount of the credit to taxpayers whose income was too low to either qualify for the credit or be eligible for the full credit. ARRA lowered the refundability threshold to $3,000 for 2009 through 2010. The ARRA provisions were subsequently extended several times and made permanent by the Protecting Americans from Tax Hikes (PATH) Act (Division Q of P.L. 114-113). Cost Administrative data from the IRS show that the amount of aggregate credit dollars claimed by all taxpayers has grown from roughly $15 billion in 1998 to nearly $55 billion in 2015, as illustrated in Figure 1. Roughly half the credit offsets income tax liability (the nonrefundable portion of the credit), and the other half exceeds income tax liability (the refundable portion of the credit, or ACTC). Generally, a qualifying child for the child tax credit is the taxpayer's dependent child who is under 17 years old and who lives with the taxpayer for more than half the year. In addition, the child must be a U.S. citizen or a resident or national of the United States. The statute requires that taxpayers who claim the child tax credit provide a valid Taxpayer Identification Number (TIN) for each qualifying

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most