Selected Issues in Tax Policy: The Child Tax Credit (CRS Report for Congress)
| Release Date |
Nov. 19, 2024 |
| Report Number |
IF12820 |
| Report Type |
In Focus |
| Authors |
Brendan McDermott |
| Source Agency |
Congressional Research Service |
Summary:
Tax reform proposals in the 119th Congress may include
reforms to the child tax credit, which increases the after-tax
incomes of some households with children. The child tax
credit was substantively modified by P.L. 115-97 (often
referred to as the Tax Cuts and Jobs Act, TCJA), and those
changes are scheduled to expire after the 2025 tax year.
This In Focus summarizes the child tax credit and briefly
examines some key policy issues that may be relevant to
proposals for its reform.
Prior to enactment of the TCJA, the child tax credit let
taxpayers reduce their tax liabilities by up to $1,000 per
child. The credit was refundable, meaning those with no
income tax liability could receive the credit as a refund. The
credit phased in with earned income: it was worth 15% of a
taxpayer’s earned income above $3,000, up to the
maximum credit amount. Taxpayers with no earned income
could not claim the credit, and those with low earned
income could claim a partial credit. The credit’s value also
phased out with a taxpayer’s modified adjusted gross
income (MAGI). Taxpayers had to reduce the value of their
credit by 5% of their MAGI above certain thresholds:
$110,000 if the taxpayer was married filing jointly and
$75,000 otherwise. (For example, a single taxpayer earning
$85,000 would have the credit reduced by 5% of $10,000,
or $500.)
Filers had to include a taxpayer identification number (TIN)
for themselves and the child for whom they claimed the
credit. Qualifying TINs could include a work-authorized
Social Security Number (SSN) or an Immigrant Taxpayer
Identification Number (ITIN) issued by the IRS. Qualifying
children generally must have been under 18 and have lived
with the taxpayer for at least half the year.
