Congress Weighs Child Tax Credit Expansion

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Tax Policy
Family cutout over a pile of U.S. currency

This week, as families across the country filed their 2024 returns, a quieter debate in Washington could reshape next year’s tax season — and the financial outlook for millions of households with children. Chief among the issues in play: whether Congress will preserve or expand the Child Tax Credit (CTC), one of the federal government’s most effective tools for reducing child poverty.

The stakes are high. If Congress fails to act, key provisions of the 2017 Tax Cuts and Jobs Act (TCJA) — including the current design of the CTC — are set to expire at the end of 2025. That would result in a significant reduction in benefits and eligibility, just as many families continue to face economic uncertainty. Lawmakers are now negotiating a broader tax package that could determine the future of the credit for years to come.

What is the Child Tax Credit?

Originally enacted in 1997 with bipartisan support, the CTC aimed to offset the costs of raising children. At the time, it offered $400 per child under age 17 and was nonrefundable. Over time, Congress expanded the credit’s size and scope, making it partially refundable in 2001 and gradually increasing the amount available to families across the income spectrum. Alongside the federal CTC, 16 states have enacted their own CTCs at the state level as well.

The federal credit reached its peak during the pandemic. Under the American Rescue Plan of 2021, it was temporarily expanded to up to $3,600 per child under 6 and $3,000 per child ages 6–17. The expansion made the credit fully refundable and paid it out monthly instead of at tax filing — lifting an estimated 2.9 million children out of poverty in 2021 alone (a 46% decline), according to U.S. Census Bureau data.

Since 2022, the CTC has reverted to the TCJA structure: a $2,000 credit per child under 17, with a refundable portion of up to $1,400 and phaseouts beginning at $400,000 for joint filers. If Congress allows TCJA provisions to expire, the credit will drop to $1,000 per child, with lower income thresholds for eligibility.

What’s Happening in Congress?

Lawmakers are weighing whether to extend some or all TCJA’s expiring provisions, including the current design of the CTC or a new version altogether. Several competing proposals reflect different visions for the CTC’s future, but strong bipartisan support signals further expansion. For instance:

  • The Family First Act (sponsored by Sen. Jim Banks, R-IN) would increase the credit to $4,200 for children under 6 and $3,000 for children ages 6–17. It would also create a $2,800 credit for pregnant mothers beginning at 20 weeks. The credit would be fully refundable, indexed to inflation, and require a minimum income of $20,000 to qualify.
  • The American Family Act (sponsored by Sen. Michael Bennet, D-CO) would expand the credit to $6,300 for newborns, $4,320 for children under 6, and $3,600 for children 6–17. It would also restore monthly payments and eliminate income-based phase-ins, ensuring families with little to no income receive the full benefit.

Both proposals reflect broader negotiations over the future of the TCJA and the size and scope of any new tax package. The House recently passed a budget resolution that allows for up to $5.3 trillion in tax cuts over 10 years. The full cost of extending TCJA provisions is estimated at over $4 trillion, making the CTC just one of many high-cost provisions competing for inclusion.

What’s Next?

If no agreement is reached by the end of 2025, the CTC will automatically revert to pre-TCJA levels — cutting the credit amount in half and reducing eligibility for many families. That would also lower the refundable portion of the credit, impacting lower-income households most directly.

As the budget reconciliation process unfolds, lawmakers face difficult choices: extend costly tax cuts, address growing deficit concerns, or invest in targeted support for working families. While short-term extensions remain a possibility, the long-term design of the CTC— and the role it plays in shaping economic opportunity for children — hangs in the balance.

Aligned's Take: The Child Tax Credit has helped families for decades. Rolling it back would strain many households. We’re encouraged by bipartisan efforts to strengthen the credit and hope families stay at the center of the conversation.