Child Tax Credit changes: New eligibility rules and a $1,400 refund cap

The Child Tax Credit is expected to change soon, with new proposals coming from both the House Republicans and the Senate. The House plan, part of Donald Trump’s “One Big, Beautiful Bill,” would raise the credit to $2,500 per child until 2028. After that, it would return to $2,000.

On the other hand, the Senate suggests a $2,200 non-refundable credit starting in 2025, which would go up over time with inflation. These different ideas show how lawmakers are trying to help families with kids in different ways.

Refundable Portion Could Shrink for Families

One major change in both plans is the limit on the refundable part of the credit. The new cap would be $1,400 per child and would be adjusted yearly based on inflation.

This is a drop from the current $1,700 refundable credit available for the 2024 tax year. Also, families making $2,500 or less each year still wouldn’t qualify for the refundable amount. That means the lowest-income households would keep missing out on this part of the help.

New Rule Requires Social Security Number

Both the House and Senate proposals would add a new rule that says families must have a Social Security Number (SSN) to get the Child Tax Credit.

Lawmakers say this rule will make it easier to check who qualifies and ensure only eligible people get the credit. However, this change could leave out some families who were able to receive the credit under the current system.

Middle- and High-Income Families May Benefit More

According to the Tax Policy Center, the House plan would mostly help middle- and higher-income families. Those families could see up to an $800 boost in their tax credit. In contrast, families with lower incomes would likely get an average increase of just $350.

This gap is raising concerns that the new credit may not be fair, as many children in low-income households might still get less than the full amount.

What Happens If No New Law Is Passed

Right now, the Child Tax Credit rules come from the Tax Cuts and Jobs Act (TCJA) of 2017, which raised the credit from $1,000 to $2,000 until the end of 2025. If the new Republican proposals don’t become law, the credit would go back to how it was before.

That means only 15% of income above $3,000 would be refundable, and the maximum refundable amount would fall to $1,000 per child.

The Future of the Credit for Other Dependents

The TCJA also added a $500 non-refundable credit for other dependents, such as older children or adult family members. The House proposal doesn’t say what would happen to this credit, but the Senate plan wants to make it permanent.

If lawmakers don’t act, this credit will expire, which could hurt families that have dependents who don’t qualify for the regular Child Tax Credit.

Timeline for Lawmakers to Make a Decision

The timing for these changes is important. House Republicans want to get the plan through the Ways and Means Committee by Memorial Day and hope to get it passed completely by July 4th.

If the Senate plan moves forward, the $2,200 non-refundable credit and $1,400 refundable credit would start for tax years beginning after December 31, 2024. These dates show when families might begin to see the effects of these changes on their taxes.

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