Republicans Let the Child Tax Credit Expansion Expire, What This Means for Your Family

Latest News on Child Tax Credit

• A bipartisan bill that would extend the Child Tax Credit through 2025 has passed through the House Ways and Means Committee.  The bill has passed the House and a vote in the Senate is expected soon.  

• Broad support from a diverse coalition of elected and community leaders, including pro-life and pro-family advocates, are supporting this bipartisan bill.  US Conference of Catholic Bishops thank members of Congress for “renewed conversation and commitment on both sides of the aisle” in this effort.

• Proposal could immediately affect millions of families filing their 2023 taxes.  Over 36 million American families will benefit with greatest impact to children living below or near the poverty line.

Key Facts

• The American Rescue Plan Act of 2021 temporarily expanded the child tax credit for the 2021 tax year to $3,600 per child younger than age 6 and $3,000 per child up to age 17.

• The expanded child tax credit reached over 61 million children in more than 36 million households, and funds were primarily used for child care, food, housing and other basic needs.

• In 2021 child poverty fell to its lowest level ever in America.

• In 2022 Congress did not renew CTC expansion, child poverty surged by 41%.

• Expansion of Child Tax Credit before Congress in 2024 has bipartisan support.  A broad coalition of conservative and pro-life faith and community leaders and progressive community based organizations have come together to support the bill.

Changes to the Child Tax Credit

In 2021, President Biden signed the American Rescue Plan, and with it the One-Year Child Tax Credit Expansion, into law. The tax credit increased the credit to $3,000 per child ($3,600 per child under age 6) for many families. It made the credit fully refundable for families who lived in the U.S. for more than six months during 2021 and removed the $2,500 earnings floor. And it required half of the credit to be paid in advance by having the IRS send monthly payments to families from July 2021 to December 2021.

Key impacts from the American Rescue Plan:

• Over 4 million children will be lifted above the poverty line.

• 27 million children will have access to new resources.

• An estimated total of 65 million children will be positively impacted by monthly installments.

Child Care Credit for 2022 Tax Year

Unfortunately, Republicans and Senator Manchin let Biden’s one-year child tax credit expire at the end of 2021. Now families applying for the credit can only get up to $2,000 per child under the age of 17. And it is only partially refundable, which means that if the credit exceeds the amount of taxes you owe, you can receive a refund for the difference.

You can claim the Child Tax Credit by entering your children and other dependents on Form 1040, U.S. Individual Income Tax Return, and attaching a completed Schedule 8812, Credits for Qualifying Children and Other Dependents.

A Temporary Solution Awaits Congressional Approval

Democrats have been seeking a permanent expansion of the Child Tax Credit, but have received pushback from Republicans in Congress. A recent compromise would bring back an expanded Child Tax Credit through 2025, benefitting fifteen million children from low-income families. The framework of this deal was made possible by a bipartisan coalition of pro-life and pro-family advocates and elected leaders, including the National Association of Evangelicals, United States Conference of Catholic Bishops, American Enterprise Institute, and the National Hispanic Christian Leadership Conference, among many others. In display of bipartisanship, the Child Tax Credit expansion passed the House 357-70. The bill now awaits a vote in the Senate.

If passed by the Senate, the bill would adjust the earnings requirements to take advantage of the tax credit, making it easier for lower-income families – those earning roughly between $10,000 and $50,000 – to get the full credit. These families would get an average credit that is about $1,130 higher than in 2022.

Families with higher incomes will also see larger benefits in future years if this expansion is passed, because the credit would be indexed to inflation to help families keep pace with rising expenses.

The Center on Budget and Policy Priorities estimates that this policy would help 16 million kids. That’s more than 1 in 5 of the nation’s 72 million children!

Some States Are Stepping Up Instead of Waiting for Congress

According to U.S. Census data in 2022 the child poverty rate "more than doubled" as the Child Tax Credit expired. However, since the federal expiration of the tax credit approximately 14 states have offered child tax credits and more are considering legislation in 2024. This state-level action showcases a recognition of the significance of family support, and emphasizes the role of states in addressing the evolving needs of their residents and mitigating the potential impact of the federal credit expiration on vulnerable populations.