115-97 . Overview

The child tax credit was initially structured in the Taxpayer Relief Act of 1997 ( P.L. 105-34 ) as a $500-per-child nonrefundable credit to provide tax relief to middle- and upper-middle-income families. Since 1997, various laws have modified key parameters of the credit, expanding the availability of the benefit to more low-income families while also increasing the value of the tax credit. The first significant change to the child tax credit occurred with the enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA; P.L. 107-16 ). EGTRRA increased the amount of the credit over time to $1,000 per child and made it partially refundable under the earned income formula. The refundable portion of the credit—the amount that exceeds income tax liability—is often referred to as the additional child tax credit or ACTC. Subsequent legislation enacted in 2003 and 2004 accelerated the implementation of the changes made under EGTRRA. In 2008 and 2009, Congress passed legislation—the Emergency Economic Stabilization Act of 2008 (EESA; P.L. 110-343 ) and the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 )—that further expanded the availability and amount of the credit to taxpayers whose income was too low to either qualify for the credit or be eligible for the full credit. ARRA lowered the refundability threshold to its current level of $3,000 for 2009 through 2010. The ARRA provisions were subsequently extended several times and made permanent by the Protecting Americans from Tax Hikes (PATH) Act of 2015 (Division Q of P.L. 114-113 ). At the end of 2017, Congress enacted P.L. 115-97 which, in addition to making numerous changes to the tax code, temporarily changed the child tax credit. Specifically, the law increased the credit for many (though not all) taxpayers by doubling the maximum amount of the credit (and increasing the maximum amount of the ACTC to $1,400), increasing the income at which the credit begins to phase out, and reducing the refundability threshold as illustrated in Table 1 . In addition, this law temporarily modified the identification (ID) number requirement of the credit, requiring taxpayers to provide the Social Security number (SSN) for every child for whom they claimed the credit. Finally, the law created a new temporary "family credit" for non-child credit eligible dependents (children ineligible for the child tax credit or older non-child dependents). Non-child credit eligible dependents excludes otherwise eligible dependents who are not U.S. citizens and are residents of Mexico or Canada. The credit is equal to $500 per non-child credit eligible dependent. The amount is not annually adjusted for inflation. The phaseout parameters of the child credit (e.g., phaseout thresholds of $400,000 married filing jointly, $200,000 other taxpayers, 5% phaseout rate) apply to the family credit. The family credit is not annually adjusted for inflation. All the modifications to the child tax credit and the new family credit are currently scheduled to expire at the end of 2025.
The child tax credit was initially structured in the Taxpayer Relief Act of 1997 (P.L. 105-34) as a $500-per-child nonrefundable credit to provide tax relief to middle- and upper-middle-income families. Since 1997, various laws have modified key parameters of the credit, expanding the availability of the benefit to more low-income families while also increasing the value of the tax credit. The first significant change to the child tax credit occurred with the enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA; P.L. 107-16). EGTRRA increased the amount of the credit over time to $1,000 per child and made it partially refundable under the earned income formula. The refundable portion of the credit—the amount that exceeds income tax liability—is often referred to as the additional child tax credit or ACTC.
Subsequent legislation enacted in 2003 and 2004 accelerated the implementation of the changes made under EGTRRA. In 2008 and 2009, Congress passed legislation—the Emergency Economic Stabilization Act of 2008 (EESA; P.L. 110-343) and the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5)—that further expanded the availability and amount of the credit to taxpayers whose income was too low to either qualify for the credit or be eligible for the full credit. ARRA lowered the refundability threshold to its current level of $3,000 for 2009 through 2010. The ARRA provisions were subsequently extended several times and made permanent by the Protecting Americans from Tax Hikes (PATH) Act of 2015 (Division Q of P.L. 114-113).
At the end of 2017, Congress enacted P.L. 115-97 which, in addition to making numerous changes to the tax code, temporarily changed the child tax credit. Specifically, the law increased the credit for many (though not all) taxpayers by doubling the maximum amount of the credit (and increasing the maximum amount of the ACTC to $1,400), increasing the income at which the credit begins to phase out, and reducing the refundability threshold. In addition, this law temporarily modified the identification (ID) number requirement of the credit, requiring taxpayers to provide the Social Security number (SSN) for every child for whom they claimed the credit.
P.L. 115-97 also created a new temporary "family credit" for non-child credit eligible dependents (children ineligible for the child tax credit or older non-child dependents). Non-child credit eligible dependents excludes otherwise eligible dependents who are citizens of Mexico or Canada. The credit is equal to $500 per non-child credit eligible dependent. The amount is not annually adjusted for inflation. The phaseout parameters of the child credit (i.e., phaseout thresholds of $400,000 married filing jointly, $200,000 other taxpayers, 5% phaseout rate) apply to the family credit. The family credit is not annually adjusted for inflation.
All the modifications to the child tax credit and the new family credit are currently scheduled to expire at the end of 2025.