The Child Tax Credit Expansion: What Parents Must Know

Raising children is expensive. If you are a parent paying for groceries, childcare, and school supplies, you are probably keeping a close eye on the Child Tax Credit. Proposed legislative changes are currently on the table that could put significantly more cash back into your pocket this tax season and beyond.

How the Child Tax Credit Works Right Now

Before looking at the proposed changes, it helps to understand exactly what the current law allows. As of the 2024 tax year, the Child Tax Credit offers up to $2,000 per qualifying child under the age of 17.

This credit is a dollar-for-dollar reduction in your tax liability. If your tax bill is $4,000 and you have two qualifying children, your bill drops to zero. However, many lower-income families do not owe $4,000 in federal income taxes. This is where the concept of “refundability” comes into play.

Under current rules, the credit is only partially refundable. This refundable portion is called the Additional Child Tax Credit. If your tax bill drops below zero, the IRS will send you a refund check, but that check is capped. For the 2023 tax year, the maximum refund was $1,600 per child. For the 2024 tax year, it increased slightly to $1,700 per child.

Income limits also apply. The credit begins to phase out for single filers earning more than $200,000 and married couples filing jointly who earn more than $400,000. For every $1,000 you earn over these limits, the credit drops by $50.

The Tax Relief for American Families and Workers Act

In January 2024, the House of Representatives passed a bipartisan tax bill by a massive 357 to 70 margin. This bill, known as the Tax Relief for American Families and Workers Act, was negotiated by Senator Ron Wyden and Representative Jason Smith. It proposed several major changes to the Child Tax Credit designed to help lower-income and middle-income parents.

While this specific bill ultimately stalled in the Senate later in the year, it serves as the foundation for the expansions that lawmakers are still actively trying to pass. The proposal included three major benefits for families:

Higher Refundable Limits: The bill proposed raising the maximum refundable amount to $1,800 for 2023, $1,900 for 2024, and matching the full $2,000 by 2025.
A Per-Child Phase-In: Under current law, the refund phase-in is calculated based on total income, regardless of how many kids you have. The proposed change would multiply the phase-in amount by the number of children in the home. A family earning $15,000 a year with three children would see their tax refund increase by over $1,000 under this new formula.
Inflation Adjustments: Currently, the $2,000 base credit is fixed. As groceries and rent get more expensive, the credit loses its purchasing power. The proposed legislation would automatically adjust the base $2,000 amount for inflation starting in the 2024 tax year.

Massive New Proposals for 2025 and Beyond

Because the initial 2024 tax package stalled, the Child Tax Credit became a central focus during the recent election cycle. Politicians from both sides of the aisle are proposing massive expansions that rival the temporary pandemic-era benefits.

During the American Rescue Plan of 2021, the credit was briefly raised to $3,600 for children under age six and $3,000 for older children. It was also fully refundable and paid out in monthly installments. Lawmakers are now proposing new plans that go even further:

The $6,000 Newborn Proposal: Vice President Kamala Harris proposed restoring the $3,600 credit for younger children and creating a brand new $6,000 tax credit specifically for a child’s first year of life. This is aimed directly at offsetting the massive upfront costs of cribs, diapers, and infant childcare.
The $5,000 Universal Proposal: Senator JD Vance suggested raising the baseline credit to $5,000 per child across the board, regardless of the child’s age, to help families offset the rising cost of living.

Regardless of which political party holds power, there is widespread agreement that the current $2,000 limit is no longer enough for modern families.

The Approaching 2025 Tax Cliff

There is a very strict deadline forcing Congress to act on the Child Tax Credit soon. The current $2,000 credit was established by the Tax Cuts and Jobs Act of 2017. The provisions in that specific law are written with an expiration date of December 31, 2025.

If lawmakers fail to pass a new tax bill before the end of 2025, the Child Tax Credit will automatically revert to its old rules. This means the credit would drop from $2,000 down to just $1,000 per child. Furthermore, the income threshold for the phase-out would drop significantly, meaning millions of middle-class families would suddenly lose access to the benefit entirely.

Because nobody in Washington wants to see middle-class taxes double in 2026, experts predict that a major tax package will absolutely have to pass. When it does, the Child Tax Credit expansion will be the centerpiece of the negotiation.

How Parents Can Prepare Right Now

While you cannot claim proposed credits until a bill officially becomes law, you can set yourself up for success this tax season by taking a few simple steps.

First, make sure you have the correct Social Security Numbers for all of your dependents. You cannot claim the Child Tax Credit without a valid SSN for your child. If you recently had a baby, apply for their Social Security card immediately so you are ready at tax time.

Second, monitor your tax withholding. You can go to IRS.gov and use their free Tax Withholding Estimator. By inputting your current pay stubs and the number of kids you have, the tool tells you exactly how to fill out your W-4 at work. Doing this ensures you get the right amount of money in your paycheck each month rather than waiting for a massive refund in April.

Finally, keep your tax software up to date. Programs like TurboTax and H&R Block will automatically update their software systems the moment Congress passes any retroactive changes to the tax code.

Frequently Asked Questions

Do I need to fill out a separate application to get the Child Tax Credit? No. You do not need to apply through a separate government program. You simply claim the credit when you file your annual federal income tax return using Schedule 8812 (Credits for Qualifying Children and Other Dependents) attached to your Form 1040.

What are the exact age requirements for a qualifying child? To qualify for the current credit, the child must be under the age of 17 at the end of the tax year. For example, if your child turns 17 on December 31, they do not qualify for the Child Tax Credit for that tax year. Instead, you might be able to claim the smaller $500 Credit for Other Dependents.

Will the IRS start sending monthly checks again? Right now, the IRS is not sending monthly checks. The monthly advance payments were a temporary measure passed during the 2021 pandemic. Under current law, you will receive the entire credit as a single lump sum when you file your taxes in the spring.