What Is the Child Tax Credit, and Will It Go Up?

A roughly $80 billion tax package under consideration in the US Senate includes an expansion of the child tax credit — a mechanism by which US families reduce the federal taxes they owe. Lawmakers from both parties advanced the legislation in the fractious House of Representatives in late January. The credit would become adjustable for inflation for tax years 2024 and 2025, and more of it would be refundable to families with low earnings. First, though, the tax package — which also includes renewing expired business tax breaks — must overcome opposition from some Senate Republicans who have expressed concerns that the more generous tax credit is too expensive.

The credit dates back to the Taxpayer Relief Act of 1997. Its terms have been made more generous several times since then, and it was made refundable in 2001, meaning cash payments are made to taxpayers who owe little or no income tax due to low earnings. Americans claim the credit for each qualifying child when they fill out their tax returns. To be eligible for the credit, children must be under the age of 17, claimed as a dependent, and must live with their parent or caregiver for more than half the year. Depending on income, families may be eligible for only a partial amount of the total credit, or not eligible at all.