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      4%Congressional                                                            ____
           A   Research Service






The Child Tax Credit: What Lies Ahead?



January 10, 2024

The child tax credit has been temporarily modified several times in recent years. Media reports suggest
policymakers may be interested in modifying the credit again in the near term to benefit low- and
moderate-income families. This Insight provides background to those discussions by summarizing recent
changes to the credit and outlining current proposals to modify it.

Recent   Legislative Changes

Under permanent law-last in effect in 2017 and scheduled to go back in effect in 2026-the child tax
credit allowed eligible households to reduce their income tax liability by up to $1,000 per child aged 16 or
lower. Lower-income working taxpayers were eligible to receive part or all of this benefit as the
refundable portion of the credit, sometimes called the additional child tax credit or ACTC. The ACTC
phased in with earned income if households had at least $3,000 of earnings. For higher-income
households, the child credit phased out.
The law commonly  referred to as the Tax Cuts and Jobs Act (TCJA; P.L. 115-97) made several temporary
changes to the permanent credit that are in effect through 2025. The TCJA increased the maximum credit
amount to $2,000 per child, modified the ACTC formula to begin phasing in at $2,500 of earned income
(compared to $3,000), capped the refundable portion of the credit at $1,400 per child (inflation-adjusted
to $1,700 per child in 2024), and increased the income levels at which the credit begins to phase out.
The American Rescue Plan Act of 2021 (ARPA; P.L. 117-2) layered additional temporary changes on top
of the TCJA changes for 2021 only. ARPA increased the maximum credit to $3,000 per child ($3,600 per
child for young children), eliminated the phase-in of the credit for low-income taxpayers so they were
eligible to receive the full or maximum amount of the credit irrespective of how much earned income they
had (this is sometimes referred to as full refundability), and expanded the eligibility age for children to
include 17-year-olds. These changes expired as scheduled at the end of 2021.
Aside from the TCJA change to the maximum ACTC, none of the parameters of the credit are adjusted for
inflation.
Details of these parameters can be found in the table at the end of this Insight. The impact of these
changes on a hypothetical married couple with two children-one young (under 6 years old) and one
older (6 to 16 years old)-is illustrated below.


                                                                Congressional Research Service
                                                                  https://crsreports.congress.gov
                                                                                      IN12297

CRS INSIGHT
Prepared for Members and
Committees of Congress

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