	Introduction

The child tax credit was created in 1997 by the Taxpayer Relief Act of 1997 ( P.L. 105-34 ) to help ease the financial burden that families incur when they have children. Like other tax credits, the child tax credit reduces tax liability dollar for dollar of the value of the credit. Initially the child tax credit was a nonrefundable credit for most families. A nonrefundable tax credit can only reduce a taxpayer's income tax liability to zero, while a refundable tax credit can exceed a taxpayer's income tax liability, providing a cash payment primarily to low-income taxpayers who owe little or no income tax. This report provides an overview of the credit under current law and also provides some summary data on these benefits. Current Law

The child tax credit allows taxpayers to reduce their federal income tax liability (the income taxes owed before tax credits are applied) by up to $2,000 per qualifying child. The total amount of their refund is calculated as 15% (the refundability rate) of earnings that exceed $2,500 (the refundability threshold), up to the maximum amount of the refundable portion of the credit ($1,400 per child). The credit phases out for higher-income taxpayers. 115-97 . The legislative changes made to the child tax credit by P.L. The maximum credit a family can receive is equal to the number of qualifying children a taxpayer has, multiplied by $2,000. Maximum Additional Child Tax Credit (ACTC) per Child, the Refundability Threshold and Refundability Rate

For taxpayers with little or no federal income tax liability, they will be eligible for little if any of the nonrefundable portion of the child tax credit. The amount of the refundable child tax credit is generally calculated using the "earned income formula" up to the maximum ACTC amount of $1,400 per qualifying child. Under the earned income formula, a taxpayer may claim an ACTC equal to 15% of the family's earned income in excess of $2,500, up to the maximum ACTC amount (i.e., up to $1,400 multiplied by the number of qualifying children). Data on the Child Tax Credit

Estimates from the Internal Revenue Service (IRS) and Tax Policy Center highlight several key aspects of the child tax credit:
The total dollar amount of the child tax credit has grown over time: Data from the IRS indicate that the total dollar amount of the child tax credit has increased significantly since enactment. These estimates do not include the impact of recent legislative changes made by P.L. 115-97 , which, all else being equal, will expand the total cost of this tax benefit. In 2018, the majority of the tax benefit will go to taxpayers with income between $75,000 and $500,000 : The Tax Policy Center (TPC) estimates that the majority of child tax credit dollars in 2018 will go to taxpayers with more than $75,000 of income, with nearly one-third of the benefit going to taxpayers with income between $100,000 and $200,000. In comparison, a relatively small share will go to very-low-income or very-high-income taxpayers. About half of the lowest-income taxpayers will receive the credit and no taxpayers with children and income over $1 million will receive the credit. The Tax Policy Center (TPC) estimates that taxpayers with children and income between $100,000 and $200,000 will on average receive a credit of over $3,000 in 2018. 115-97 . As previously discussed, these legislative changes are currently scheduled to be in effect from 2018 through the end of 2025. Total Child Tax Credit Dollars by Income Level

The Tax Policy Center (TPC) estimated the distribution of aggregate child tax credit by income level for 2018 under current law (i.e., including the changes made by P.L. 115-97 ). Taxpayers with income under $20,000 will receive on average a credit of less than $1,000, while the wealthiest taxpayers with children (income over $1 million) will on average receive a credit of $10.
This report provides an overview of the child tax credit under current law, including temporary changes made by the 2017 tax revision (P.L. 115-97).
When calculating the total amount of federal income taxes owed, eligible taxpayers can reduce their federal income tax liability by the amount of the child tax credit. Currently, eligible families that claim the child tax credit can subtract up to $2,000 per qualifying child from their federal income tax liability. The maximum amount of credit a family can receive is equal to the number of qualifying children in a family multiplied by $2,000. If a family's tax liability is less than the value of their child tax credit, they may be eligible for a refundable credit calculated using the earned income formula. Under this formula, a family is eligible for a refund equal to 15% of their earnings in excess of $2,500, up to the maximum amount of the refundable portion of the credit. The maximum amount of the refundable portion of the credit is $1,400 per qualifying child. The credit phases out for single parents with income over $200,000 and married couples with income over $400,000. Many of these parameters are scheduled to expire at the end of 2025 under P.L. 115-97.
The child tax credit was created in 1997 by the Taxpayer Relief Act of 1997 (P.L. 105-34) to help ease the financial burden that families incur when they have children. Like other tax credits, the child tax credit reduces tax liability dollar for dollar of the value of the credit. Initially the child tax credit was a nonrefundable credit for most families. A nonrefundable tax credit can only reduce a taxpayer's income tax liability to zero, while a refundable tax credit can exceed a taxpayer's income tax liability, providing a cash payment to low-income taxpayers who owe little or no income tax.
Since it was first enacted, the child tax credit has undergone significant changes. Most recently at the end of 2017, Congress expanded the credit, especially for middle- and upper-income taxpayers, by doubling the credit amount and more than tripling the income level at which the credit begins to phase out. Additional, although comparatively more modest, changes were made to the refundable portion of the credit as well, including increasing the refundable credit amount from $1,000 to $1,400 per child and lowering the refundability threshold from $3,000 to $2,500. These changes are scheduled to be in effect from 2018 through the end of 2025.
Estimates from the IRS indicate that the total dollar amount of the child tax credit has increased significantly since enactment from approximately $22 billion to $54 billion. These estimates do not include the impact of recent legislative changes made by P.L. 115-97, which will, all else being equal, expand the total cost of this tax benefit.
The Tax Policy Center (TPC) estimated the distribution of the child tax credit by income level for 2018 under current law (including the changes made by P.L. 115-97) and found that the majority of child tax credit dollars will go to taxpayers with more than $75,000 of income, with nearly one-third of the benefit going to taxpayers with income between $100,000 and $200,000. In comparison, a relatively small share will go to very-low-income or very-high-income taxpayers. TPC also estimated that the vast majority of taxpayers with children will receive the child tax credit. About half of the lowest-income taxpayers will receive the credit and no taxpayers with children and income over $1 million will receive the credit. Finally, TPC estimated that taxpayers with income between $100,000 and $200,000 will on average receive the largest credit of over $3,000. Taxpayers with children and income under $20,000 will receive on average a credit of less than $1,000, while the wealthiest taxpayers with children will receive on average a credit of $10.