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1 1 (January 17, 2024)

handle is hein.crs/goveoaf0001 and id is 1 raw text is: Congressional ____ e' Research Service The Child Tax Credit: What Lies Ahead? Updated January 17, 2024 The child tax credit has been temporarily modified several times in recent years. On January 16, Senate Finance Committee Chair Ron Wyden and House Ways and Means Chair Jason Smith announced that they had reached the deal on a framework that included further changes to the child credit. This Insight provides background to those discussions by summarizing prior legislative changes to the credit and outlining the current legislative proposal to modify it-the Tax Relief for American Families and Workers Act of 2024. 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 $1,600 per child in 2023 and $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. Congressional Research Service https://crsreports.congress.gov IN12297 CRS INSIGHT Prepared for Members and Committees of Congress

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