Congress Weighs the Future of the Child Tax Credit
As Congress negotiates the next major federal tax package, the future of the Child Tax Credit (CTC) is once again up for debate. With key provisions of the 2017 Tax Cuts and Jobs Act (TCJA) set to expire at the end of 2025, lawmakers face important decisions about whether to preserve, expand, or overhaul one of the federal government’s most widely used family tax benefits.
The CTC has long served as a tool to offset the cost of raising children, and the structure of the credit in the years ahead will have real implications for family budgets and child poverty rates.
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Originally enacted in 1997 with bipartisan support, the CTC aimed to offset the costs of raising children.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 in the Latest Proposals?
As part of ongoing budget and tax negotiations, both the House and Senate have released proposals that would modify the credit starting in 2025:
House Proposal: Increases the credit to $2,500 per child from 2025 through 2028, followed by a return to $2,000, indexed for inflation thereafter.
Senate Proposal: Permanently sets the credit at $2,200 beginning in 2025, also with inflation indexing.
While both proposals offer more support than a return to pre-TCJA levels, they differ in duration and design with the House opting for a temporary boost and the Senate aiming for a permanent but more modest increase.
Looking Ahead
Congress has until the end of 2025 to reach an agreement, and negotiations are already intensifying as lawmakers balance the goals of responsible tax policy, deficit reduction, and promoting economic opportunity for families.
As the 2025 deadline approaches, Congress has a chance to modernize the CTC in a way that strengthens families and promotes long-term economic resilience. Lawmakers are weighing options that range from short-term extensions to permanent, targeted reforms designed to encourage work, reinforce family stability, and ensure responsible stewardship of taxpayer resources.