The U.S. Congress is trying to keep more money in the wallets of American parents, particularly its lowest earners. On January 16, 2024, lawmakers announced The Tax Relief for American Families and Workers Act of 2024, a bipartisan tax agreement that would increase access to the Federal Child Tax Credit, providing tax benefits for up to 16 million of the poorest families who had been previously shut out. It would also provide a modest, inflation-adjusted increase to families who are eligible for the additional Child Tax Credit of $200 in 2023, and an additional $100 annually through 2025.

The U.S. House of Representatives could vote on the plan as early as the week of Jan. 29, 2024.

What is the current Child Tax Credit for 2023? Who is eligible?

Current 2023 Child Tax Credit

The Child Tax Credit (CTC) is a tax credit that is available to eligible American taxpayers with qualifying children under the age of 17.

According to the IRS, the nonrefundable 2023 child tax credit is currently $2,000 per child. The refundable portion of the credit, known as the additional child tax credit, is worth up to $1,600 per child.

In order to qualify for the Child Tax Credit, you must be a parent or guardian filing taxes with an adjusted gross income of less than $200,000 (or $400,000 if you’re filing a joint return). Higher earners are eligible for partial credit. To check on your eligibility, the IRS has created a handy tool called the Interactive Tax Assistant. 

2023 CTC eligibility criteria

For your child or dependent to qualify, they must meet the following criteria:

• Have a valid Social Security number
• Be under the age of 17 at the end of 2023
• Be dependent to you as defined as the following: Your son, daughter, grandchild, stepchild, eligible foster child, brother, sister, half-brother, half-sister, niece, or nephew
• Have provided less than half of their own financial support in 2023
• Lived with you longer than half a year
• Be claimed as your dependent on your tax return
• Did not file a joint return with their spouse or filed it only to claim a refund of income tax withheld or estimated tax paid
• Be a U.S. citizen, U.S. national, or U.S. resident alien

What are the proposed changes to the 2023 Child Tax Credit?

Proposed 2023 Child Tax Credit Changes

Under the Tax Relief for American Families and Workers Act of 2024, the refundable Child Tax Credit would increase to $1,800 per child, with additional increases to $1,900 in tax year 2024 and $2,000 in tax year 2025.

The plan would also expand access to the lowest-income workers who are currently not eligible to receive the full $2,000 credit per child. It would also enable them to receive the credit for each child they have, which is a new, and potentially valuable, provision.

For example, right now, a single father with two kids who currently makes $10,000 per year is eligible for $1,250 in tax credit benefits. Under The Tax Relief for American Families and Workers Act of 2024, they would be eligible for $2,500 in tax credit benefits. (See the Bipartisan Policy Center for more about how earnings affect the tax credit benefits.)

The Tax Relief for American Families and Workers Act of 2024 was proposed by U.S. House Ways and Means Committee Chairman Jason Smith (R-Mo) and Senate Finance Committee Chairman Ron Wyden (D-Ore).

When was the Child Tax Credit enacted? How does it differ from the American Rescue Plan?

The Federal Child Tax Credit has been around since 1997, when it was introduced by President Bill Clinton as part of the Taxpayer Relief Act, which cut federal taxes for the first time since the 1980s. Several of its mandates, like the Roth IRA and the Child Tax Credit, are still around today.

As part of the Child Tax Credit of 1997, eligible taxpayers could deduct up to $400 from the amount they owed in federal income taxes for each child they had under the age of 17.

It received modest deduction increases until 2001, when a refundable component, commonly known as the additional child tax credit, was introduced. This gave a partial refund to households who didn’t owe taxes or who owed less than the credit amount.

By 2012, the value of the Child Tax Credit had risen to $1,000, and by 2017 it had doubled to $2,000.

American Rescue Plan Child Tax Credits

During the Covid-19 pandemic, President Joe Biden introduced a host of benefits designed to get Americans back on their feet through the American Rescue Plan, including direct stimulus payments, increased access to healthcare services, emergency rental assistance, and greater unemployment relief.

In addition, under the plan, the Child Tax Credit allowance increased to $3,600 per child for children under six, and $3,000 per child for children aged six–17. It also raised the age threshold from 16 to 17, and instead of offering an annual tax claim for the credit, it was available via monthly payments over a six-month period.

However, these benefits expired at the end of 2021, and while Biden included them in his Build Back Better Plan of 2022, fierce resistance from Republicans and Senator Joe Manchin (D-WV) resulted in the provision’s exclusion. The Build Back Better Plan was reworked into the Inflation Reduction Act and eventually signed into law in August 2022. Subsequently, the Child Tax Credit reverted to its previous pre-pandemic levels.

Advocates have argued that losing federal benefits like the Child Tax Credit caused childhood poverty levels to skyrocket in 2022.

The U.S. Census reported that the child poverty rate rose to 12.4% in 2022, a more than 50% increase over 2021, when it was at 5.2%. It cited key changes in federal tax policy, including the expiration of temporary expansions to the Child Tax Credit (CTC). At the same time, the Census Bureau also reported that inflationary pressures caused the cost of living to increase by 7.8%, marking its biggest jump since 1981.

In an effort to gain support for The Tax Relief for American Families and Workers Act of 2024, Wyden said, “Sixteen million kids from low-income families will be better off as a result of this plan, and given today’s miserable political climate, it’s a big deal to have this opportunity to pass pro-family policy that helps so many kids get ahead.”

How do I get the Child Tax Credit?

To claim the Child Tax Credit, simply fill out a Form 1040, U.S. Individual Income Tax Return along with the completed Schedule 8812, Credits for Qualifying Children and Other Dependents.

What is the difference between a refundable and a nonrefundable tax credit?

According to the IRS, the key difference between refundable and nonrefundable tax credits is whether or not their tax liabilities can be greater than zero.

• Under a refundable tax credit, taxpayers can lower their liability to zero and receive a refund.
• But under a nonrefundable tax credit, you can’t lower your liability further than zero — in other words, the credit can’t be used to increase your tax refund; it can only be used to lower your tax bill if you owe one.

When is the tax year 2023?

Tax year 2023 includes taxes owed on earnings made between Jan. 31 and Dec. 31, 2023. Filings for the 2023 tax year are due to the IRS by Monday, April 15, 2024.