We are beginning a new era in America, with changes in the focus of the federal government’s position and its approach regarding financial allocations and tax benefits, among other stimulus tools that have been used throughout the country’s history to provide impulses to the most needy families.
One of the programs that could undergo changes with the arrival of Donald Trump to serve his second term in the White House is the Child Tax Credit (CTC). After the president implemented the Tax Cuts and Jobs Act of 2017 (TCJA), which increased the credit to $2,000 for each child under 17 years of age.
However, these provisions will expire after 2025 unless Congress intervenes, which could impact tax returns for 2027.
What could change in the CTC stimulus payment?
In 2017, the TCJA not only raised the CTC, but also expanded phaseout thresholds for higher-income families. While this measure sought to provide broader relief, it also raised debates about equity in the distribution of benefits.
The risk for this program is that the expiration date of these provisions is approaching, its future remains uncertain. The credit reduction could result in a significant decline, raising concerns among some lawmakers about the impact on families.
For now, a portion of the CTC is refundable, meaning recipients can get a refund even if they have no taxes to pay. But, the proposed changes could limit this feature, focusing more on reducing tax obligations for taxpayers.
Despite being approved by the House of Representatives, the proposal to expand access to the CTC and make retroactive payments for the refundable portion corresponding to 2023 was blocked in the Senate.
How to claim the Child Tax Credit in 2024-2025
The child tax credit is a benefit designed for people with dependent children under the age of 17, the maximum amount of which is $2,000 per child. Eligibility for this credit depends on the child’s marital status, income, and relationship with the caregiver. High income may result in a credit reduction or ineligibility, as the credit is gradually reduced based on modified adjusted gross income (MAGI).
For 2024, the child tax credit maintains the maximum value of $2,000, with a refundable portion of up to $1,700. The MAGI thresholds remain at $400,000 for married filing jointly and $200,000 for other filers. Exceeding these limits results in a decrease of $50 for every $1,000 of additional income until the credit is eliminated.
In 2025, the credit will remain $2,000 with a refundable portion of $1,700, and income thresholds will remain the same. However, starting in 2026, unless an extension is approved, the credit will revert to $1,000, plus income thresholds will return to pre-2017 figures. To qualify, an applicant must meet seven criteria, including the child’s age, relationship, dependency status, residency, financial support, citizenship, and income requirements.
