Rep. Jason Smith, R-Mo., speaks during a House Oversight and Accountability Committee impeachment inquiry hearing into U.S. President Joe Biden on Sept. 28, 2023.
Jonathan Ernst | Reuters
As Congress wrestles over President-elect Donald Trump’s agenda, several key tax provisions are in limbo, including the child tax credit claimed by millions of families.
Enacted by Trump, the Tax Cuts and Jobs Act of 2017, or TCJA, temporarily increased the maximum child tax credit to $2,000 from $1,000 per child under 17 and widened eligibility with higher-income phaseouts. But the higher benefit will revert after 2025 without action from Congress, which could impact returns filed in 2027.
“The last thing families need is to see Washington slashing their child tax credit in half,” House Ways and Means Committee Chairman Jason Smith, R-Mo., said Tuesday during a committee hearing, which repeatedly addressed the expiring tax break.
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In addition to a higher maximum benefit, TCJA capped the refundable portion of the child tax credit, which reduces the benefit for lower-income families without taxes due.
“The child tax credit is upside down because it gives more benefits to higher-income people than lower-income people,” Chuck Marr, vice president for federal tax policy at the Center on Budget and Policy Priorities, previously told CNBC.
An estimated 17 million children under the age of 17 with lower-income parents won’t receive the full value of the child tax credit in 2025, according to a Tax Policy Center analysis released in December.
Despite concerns over the federal budget deficit, there’s been recent support from Democrats and Republicans to extend the expiring child tax credit.
House lawmakers in January 2024 passed a bipartisan tax package, including a child tax credit expansion. The change aimed to increase access and retroactively boost the refundable portion for 2023 and could have triggered refund checks.
While Senate Republicans in August blocked legislation due to concerns about the policy, they expressed interest in future negotiations.
But with trillions in competing priorities and a growing budget deficit, it’s unclear if lawmakers will extend the boosted child tax credit and whether the future design could change.
The three-month fiscal year 2025 deficit ballooned to $710.9 billion in December, nearly 40% above than the same period the previous year, the U.S. Department of the Treasury reported on Tuesday.