AMERICAN households may see the federal child tax credit bump up to $2,500 starting this year under new legislation.
As Congress negotiates the official numbers outlined in President Donald Trump’s “big beautiful” spending bill, families are slated to receive the boost to their annual payment.
American families may see a boost to the Child Tax Credit under new legislation[/caption]
One of the provisions in the One Big Beautiful Bill Act may raise the Child Tax Credit up to $2,500[/caption]
The One Big Beautiful Bill Act is a budget reconciliation bill proposed by Trump to pass provisions that will provide economic support to working and middle-class Americans and reduce the national deficit.
One of the key provisions in the bill is the Child Tax Credit, aimed at financially supporting parents and caregivers by reducing their owed federal income taxes or offering a partial refund.
In 2017, the Tax Cuts and Jobs Act temporarily increased the maximum credit from $1,000 to $2,000.
However, this will expire after this year should Congress not take action.
Americans are awaiting the Senate and House to draft and pass legislation that will raise the Child Tax Credit.
The Senate has proposed a version of the bill that would permanently raise the credit cutoff to $2,200 beginning in 2025, per a draft of the text released Monday.
In subsequent years, the Child Tax Credit would increase to account for inflation.
On the other hand, the House has drafted a version of the One Big Beautiful Bill that would increase the credit up to $2,500 from 2025 through 2028.
After 2028, the Child Tax Credit would be capped at $2,000, increasing only due to inflation.
Regardless of which version Trump signs into law, the changes would not be beneficial to the lowest-earning families, according to some policy experts.
“It’s extremely disappointing,” Kris Cox, director of federal tax policy with the Center on Budget and Policy Priorities’ federal fiscal policy division, told CNBC.
“The [Child Tax Credit] increase will go to families with middle and upper incomes.”
A ‘CENTRAL PROBLEM’
This year, the tax credit is worth up to $2,000 per qualifying dependent under 17 with a valid Social Security number.
If the Child Tax Credit surpasses the amount that an individual owes in taxes, they may be refunded up to $1,700 of the credit.
Trump’s main policy points
- Implementing tax cuts, including no tax on tips.
- Protecting Social Security and Medicare – Trump said, “Incomes will skyrocket and the middle class will prosper like never before.”
- Protecting borders – He pledged to end the “border nightmare.” That means two things on day one – “Drill baby Drill,” as he said, and close the borders.
- Finishing building the wall.
- Keeping our “sons and daughters safe.”
- Replenishing the military and building a military “dome” – Trump insisted he could stop wars with just a phone call and said no military would be able to penetrate the USA if he came into office.
- Ending the war in Ukraine and imposing tariffs on Iran.
- Vowing to “beat” China.
- Working to decrease prices and ease inflation.
- Bringing down the cost of energy.
- Making cities “safe, clean and beautiful” again.
- Making it possible for Americans to buy gas-run cars by ending the electric vehicle mandate on the first day of his presidency.
Very low-income families cannot access the full $2,000 credit, while for very high-income families, the tax break phases out, Elaine Maag, senior fellow in the Urban-Brookings Tax Policy Center, told CNBC.
The Child Tax Credit is calculated as 15% of your adjusted gross income, or AGI, after the first $2,500 of earnings, with a limit of $2,000 per child.
Once AGI passes a certain amount – $400,000 for married couples filing together or $200,000 for all other filers – the tax break begins to phase out.
Roughly 17 million children do not receive the Child Tax Credit in its entirety under current legislation because many American families bring in minimal income and do not owe taxes, according to Cox.
The bills proposed by the Senate and House do not change this “central problem,” she said.
Last year, the House passed a bipartisan bill to combat this issue by raising the refundable portion of the Child Tax Credit, which was later rejected by the Senate.
Aside from boosting the Child Tax Credit, the One Big Beautiful Bill is aimed at saving Americans money in other ways – including a $4,000 Social Security deduction.
Plus, families could score a new $1,000 tax credit in a move to “put money back in pockets.”
