Over the next ten years, the structure of the Child Tax Credit (CTC) is scheduled to change, complicating efforts to extend enhanced Child Tax Credit benefits or reform the Child Tax Credit for the long-term. Rather than take an all-or-nothing approach or relying on temporary expansions, lawmakers might consider alternative options that better target low-income households, retain work incentives, reduce the impact on federal revenue, and provide taxpayers with a stable, consistent tax code.
Beginning in 2018, The 2017 Tax Cuts and Jobs Act (TCJA) expanded the Child Tax Credit increasing the maximum credit from $1,000 to $2,000 and the refundable portion of the credit to $1,400 indexed for inflation. It also lowered the starting point for the credit to phase-in to $2,500 of earned income and expanded the phase-out range. The TCJA changes expire after 2025, after which the credit will revert to the policy that prevailed before the TCJA. After 2025, the credit will be worth a maximum $1,000, phasing in at a slightly higher income threshold and phasing out at a significantly lower income threshold.