The Child Tax Credit: How It Works and Who Receives It

The Child Tax Credit: Current Law
June 22, 2020How It Works and Who November 17, 2020 Receives It Margot L. Crandall-Hollick
This report provides an overview of the child tax credit under current law, including 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).
Margot L. Crandall-Hollick
Acting Section Research
When calculating the total amount of federal income taxes owed, eligible taxpayers can reduce
Manager
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 a review of Acting Section Research temporary changes made to the credit by P.L. 115-97 (often referred to as the Tax Cuts and Jobs Manager Act or TCJA). The child tax credit allows eligible taxpayers to reduce their federal income tax liability by up to $2,000 per qualifying child. The maximum amount of the credit is equal to the number of is equal to the number

of qualifying children qualifying children in a familya taxpayer has multiplied by $2,000. If multiplied by $2,000. If a family’stheir tax liability is less than the 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 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 tothis 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 $1,400 per child, the maximum amount of the refundable portion of the creditamount of the refundable portion of the credit is $1,400 per qualifying
child. The credit phases out for . The credit phases out for singleunmarried parents with income over $200,000 and married couples with income over $400,000. 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.Many of these parameters are scheduled to expire at the end of 2025 under P.L. 115-97. The amount of the credit by income for a taxpayer with one qualifying child is illustrated below. Child Tax Credit Amount by Income Level Source: See Figure 1.
The child tax credit was created in 1997 by the Taxpayer Relief Act of 1997 (P.L. 105-34) 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 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 that families incur when they have children. Like other tax credits, the child tax credit reduces tax liability dollar for do llardollar of of
the value of the credit. Initially the child tax credit was a nonrefundable credit for most families. A nonrefundable tax the value of the credit. Initially the child tax credit was a nonrefundable credit for most families. A nonrefundable tax creditcre dit
can only reduce a taxpayer’s income tax liability to zero can only reduce a taxpayer’s income tax liability to zero, while. In contrast, a refundable tax credit can exceed a taxpayer’s income tax a refundable tax credit can exceed a taxpayer’s income tax
liability, providing a cash payment to low-liability, providing a cash payment to low- and some moderate-income taxpayers who owe little or no income tax. income taxpayers who owe little or no income tax.
Since it was first enacted, theThe child tax credit has undergone significant changes child tax credit has undergone significant changes over time. Most recently. Most recently, at the end of 2017, Congress expanded the credit as part of the TCJA (P.L. 115-97). The TCJA doubled the maximum at the end of 2017, Congres s
expanded the credit, especially for middle- and upper-income taxpayers, by doubling the credit amount and more than credit amount and more than
triplingtripled the income level at which the credit begins to phase out. Additionally, although comparatively more modest, changes the income level at which the credit begins to phase out. Additionally, 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 were made to the refundable portion of the credit as well, including increasing the refundable credit amount from $1,000 to
$1,400$1,400 per child and lowering the refundability threshold from $3,000 to $2,500. These changes are scheduled to be in effect per child and lowering the refundability threshold from $3,000 to $2,500. These changes are scheduled to be in effect
from 2018from 2018 through the end of 2025.through the end of 2025.
Estimates Data from the IRS indicate that the total dollar amount of the child tax credit has increased significantly since enactment from the IRS indicate that the total dollar amount of the child tax credit has increased significantly since enactment
from approximately $from approximately $2223 billion billion in 1998 to $118 billion in 2018, with the largest increase coming after the TCJA expansions, as illustrated below. Congressional Research Service link to page 12 The Child Tax Credit: How It Works and Who Receives It Total Real Child Tax Credit Dollars, 1998-2018 Source: See Figure 2. The Tax Policy Center (TPC) estimated the distribution of the child tax credit by income level for 2019 under current law (including the changes made by the TCJA, as illustrated in the table below). As illustrated in these estimates, the majority of taxpayers with children received the child tax credit. Slightly less than half of the lowest-income taxpayers with children received the credit and about a quarter of the highest-income taxpayers with children received the credit. TPC estimated that to $51 billion for 2017. 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 2019 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 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. Slightly less than half of the
lowest-income taxpayers with children 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.
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link to page 4 link to page 4 link to page 5 link to page 5 link to page 6 link to page 6 link to page 6 link to page 7 link to page 7 link to page 8 link to page 8 link to page 8 link to page 9 link to page 11 link to page 12 link to page 13 link to page 5 link to page 10 link to page 11 link to page 13 link to page 13 link to page 14 link to page 14 link to page 4 link to page 15 The Child Tax Credit: Current Law$200,000 received the largest credit on average, of more than $3,000. Taxpayers with children and income under $20,000 received a credit of less than $1,000 on average. Taxpayers with Children, by Income Level in 2019 % of Taxpayers Child Tax Average who Credit as % Child % of All Receive the of After-Tax Credit per Income Level Taxpayers Child Credit Income Taxpayer Less than $10,000 2.4 47.8 3.5 $250 $10,000-$20,000 8.5 68.0 4.8 $850 $20,000-$30,000 10.4 84.8 5.7 $1,520 $30,000-$40,000 8.6 90.8 6.2 $2,160 $40,000-$50,000 6.9 94.3 5.7 $2,450 $50,000-$75,000 13.6 96.4 5.0 $2,790 $75,000-$100,000 9.7 98.8 3.9 $2,980 $100,000-$200,000 23.7 99.5 2.6 $3,040 $200,000-$500,000 13.2 98.2 1.2 $2,790 More than $500,000 2.5 26.9 0.1 $649 All 100 90.2 2.2 $2,370 Source: See Figure 4 and Figure 5. Congressional Research Service link to page 5 link to page 5 link to page 7 link to page 7 link to page 8 link to page 8 link to page 8 link to page 9 link to page 10 link to page 10 link to page 10 link to page 11 link to page 12 link to page 13 link to page 14 link to page 7 link to page 12 link to page 13 link to page 14 link to page 14 link to page 15 link to page 6 link to page 15 The Child Tax Credit: How It Works and Who Receives It

Contents
Introduction ................................................................................................................... 1
Current Law ................................................................................................................... 1
Detailed Overview of Current Credit ......................................................................................... 3 2
Maximum Credit per Child .................................................................................... 2
The Nonrefundable $500 Credit for Non-Child Tax Credit Dependents......................... 3
Maximum Additional Child Tax Credit (ACTC) per Child, the Refundability
Threshold, and Refundability Rate ........................................................................ 3 4
The Phaseout Threshold and Phaseout Rate .............................................................. 4
Definition of a Qualifying Child .................................................................................. 45
ID Requirements to Claim the Child Tax Credit.............................................................. 56
Disallowance of the Credit Due to Fraud or Reckless Disregard of the Rules ...................... 56
Data on the Child Tax Credit............................................................................................. 56
Total Child Tax Credit Dollars, 1998-20172018 .................................................................... 67
Total Child Tax Credit Dollars by Income Level ............................................................. 8
Share of Taxpayers with Children Receiving the Child Tax Credit ..................................... 9
Average Child Tax Credit Amount.............................................................................. 10

Figures
Figure 1. Child Tax Credit Amount by Income Level ............................................................. 2 3
Figure 2. Total Real Child Tax Credit Dollars, 1998-20172018...................................................... 78
Figure 3. Estimated Share of Total Child Tax Credit Dollars by Income Level, 2019, 2018 ........................................ 8. 9
Figure 4. Estimated Share of Taxpayers with Children and Al Taxpayers Receiving the
Child Tax Credit by Income Level Income, 2019 ........................................................................ 10
Figure 5. Estimated Average Child Tax Credit Amount by Income Level for Taxpayers
with Children and All Taxpayers, 2019 ......................................................... 10 Figure 5. Average Child Tax Credit for Taxpayers with Children by Income, 2019 .................. 11

Tables
Table 1. Table 1. Overview of Key Aspects of the Child Tax Credit Parameters Under Current Law...................................................... 2 1

Contacts
Author Information ....................................................................................................... 12
11

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Introduction
The child tax credit was created in 1997 by the Taxpayer Relief Act of 1997 (P.L. 105-34) to help 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 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. Initial y the child child tax credit reduces tax liability dollar for dollar of the value of the credit. Initial y the child
tax credit was a nonrefundable credit for most families. A nonrefundable tax credit can only 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 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 taxpayer’s income tax liability, providing a cash payment primarily to low -income taxpayers who -income taxpayers who
owe little or no income tax. Over the past 20 years, legislative changes have significantly changed owe little or no income tax. Over the past 20 years, legislative changes have significantly changed
the credit, transforming it from a general y nonrefundable credit available only to the middle and the credit, transforming it from a general y nonrefundable credit available only to the middle and
upper-middle class, to a refundable credit that more low-income families are eligible to claim.upper-middle class, to a refundable credit that more low-income families are eligible to claim.
Most recently, at the end of 2017, Congress significantly expanded the credit as part of P.L. 115- 97, often referred to as the Tax Cuts and Jobs Act or TCJA.1 The law significantly expanded eligibility for and the amount of the credit for many higher-income taxpayers, with a more modest expansion for lower-income taxpayers. This report provides an overview of the credit under current law and also provides some summary This report provides an overview of the credit under current law and also provides some summary
data on these benefits. For a complete legislative history of the credit, see CRS Report R45124, data on these benefits. For a complete legislative history of the credit, see CRS Report R45124,
The Child Tax Credit: Legislative History, by Margot L. Crandal -Hollick. , by Margot L. Crandal -Hollick.
Current Law
The child tax credit al ows taxpayers to reduce their federal income tax liability (the income taxes The child tax credit al ows 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.owed before tax credits are applied) by up to $2,000 per qualifying child.2 If the value of the credit If the value of the credit
exceeds the amount of tax a family owes, the family may be eligible to receive a full or partial exceeds the amount of tax a family owes, the family may be eligible to receive a full or partial
refund of the difference. The refundable portion of the credit is sometimes referred to as the refund of the difference. The refundable portion of the credit is sometimes referred to as the
additional child tax credit or ACTC. The total amount of their refund is calculated as 15% (the or ACTC. 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 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). maximum amount of the refundable portion of the credit ($1,400 per child).
The credit phases out for higher-income taxpayers. The child tax credit can offset a taxpayer’s The credit phases out for higher-income taxpayers. The child tax credit can offset a taxpayer’s
Alternative Minimum Tax (AMT) liability. Currently, the maximum credit per child, refundability Alternative Minimum Tax (AMT) liability. Currently, the maximum credit per child, refundability
threshold, and phaseout thresholds are not indexed for inflation. From 2018 to 2025, the threshold, and phaseout thresholds are not indexed for inflation. From 2018 to 2025, the
maximum amount of the ACTC is indexed for inflation.maximum amount of the ACTC is indexed for inflation. Residents of the U.S. territories general y do not receive the federal child credit, although families residing in the territories with three or more children may receive the ACTC using an alternative formula.3 1 T he original title of the law, the T ax Cuts and Jobs Act, was stricken before final passage because it violated what is known as the Byrd rule, a procedural rule that can be raised in the Senate when bills, like the tax bill, are considered under the process of reconciliation. T he actual title of the law is “T o provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018.” For more information on the Byrd rule, see CRS Report RL30862, The Budget Reconciliation Process: The Senate’s “Byrd Rule”, by Bill Heniff Jr. 2 T he child tax credit can be found in Section 24 of the Internal Revenue Code (26 U.S.C. §24). 3 All families (including those in U.S. territories) with three or more qualifying children can calculate the ACT C using an alternative formula. T he alternative formula is the amount by which Social Security taxes paid exceed the earned income tax credit (EIT C) up to the maximum refundable credit. For most families, the ACT C under the earned income formula will be larger than the ACT C under the alternative formula. However, because residents of U.S. territories are generally ineligible for the EIT C, the formula effectively equals the lesser of their Social Security taxes paid or their maximum ACT C. Under the alternative formula, taxpayers with one or two qualifying children are effectively Congressional Research Service 1 link to page 6 link to page 6 The Child Tax Credit: How It Works and Who Receives It Table 1 provides an overview of key provides an overview of key
provisions of the child tax credit under current law and how provisions of the child tax credit under current law and how they wil change beginning in 2026, they wil change beginning in 2026,
as scheduled under P.L. 115-97. as scheduled under P.L. 115-97.
Table 1. Overview of Key Aspects of the Child Tax Credit Parameters Under Current Law
Parameter
(2018-2025) (2026- ) Credit Amount Maximum Credit
Post 2025a
Maximum credit per child
$2,000
$1,000
Maximum refundable
portion of the credit per
$1,400
$1,000
child (ACTC)
Refundability Threshold
$2,500
$3,000
Refundability Rate
15%
15%
$200,000 unmarried taxpayersb
$75,000 unmarried taxpayers
Phaseout Threshold
$400,000 married taxpayers
$110,000 married taxpayers
(joint returns)
(joint returns)
Phaseout Rate
5%
5%
Offset AMT tax liability
YES
YES
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The Child Tax Credit: Current Law

Source: Internal Revenue Code, 26 U.S.C. §24.
Note: The refundable portion of the child tax credit is often referred to as the additional child tax credit or
ACTC.
a. Absent legislative action, many of the changes made to the child tax credit by P.L. 115-97 wil expire and the
credit parameters wil revert to pre-2018 levels.
b. The phaseout threshold for married taxpayers that file separate returns is $200,000 from 2018 -2025. Pre-
2018/post 2025, the phaseout threshold for married taxpayers that file separate returns is/wil be $55,000 .
Detailed Overview of Current Credit
Each of the key parameters of the child tax credit as in effect from 2018 through the end of 2025
is $2,000 per child 0-16 years old. $1,000 per child 0-16 years old. Amount Maximum Additional $1,400a per child aged 0-16 years old. $1,000 per child aged 0-16 years old. Child Tax Credit (ACTC) Refundability Formula 15% of earnings above $2,500, not to 15% of earnings above $3,000, not to for ACTC exceed the maximum of $1,400 per exceed the maximum of $1,000 per child. child. Phaseout Threshold $400,000 married filing jointly $110,000 married filing jointly $200,000 head of household & single $75,000 head of household & single $200,000 married filing separately $55,000 married filing separately Phaseout Rate Credit is reduced by $50 for every Credit is reduced by $50 for every $1,000 (or fraction thereof) above the $1,000 (or fraction thereof) above the phaseout threshold. phaseout threshold. Other Provisions Qualifying Child ID Social Security Number (SSN). SSN or individual taxpayer identification Requirements number (ITIN). Eligibility to Residents Residents of the territories general y Same as 2018-2025. of Puerto Rico and do not receive the federal child credit, Other Territories although families in territories with three or more children may receive the ACTC using an alternative formula.b Source: CRS analysis of IRC Section 24, P.L. 115-97, and Joint Committee on Taxation, JCX-17-20. Notes: a. Annual y adjusted for inflation. b. The alternative formula is the amount by which Social Security taxes paid exceed the earned income tax credit (EITC) up to the maximum refundable credit. Because residents of territories are general y ineligible for the EITC, the formula effectively equals the lesser of their Social Security taxes paid or their maximum ACTC. For more information, see Joint Committee on Taxation, JCX-17-20. ineligible for the ACT C. Residents of American Samoa who file an American Samoan tax return may claim the nonrefundable portion of the child tax credit against their America Samoan income taxes. Residents of American Samoa who have three or more qualifying children may also claim the ACT C, but only under the alternative formula. T he T reasury covers the cost of any amount of the ACT C provided to America Samoan residents under the alternative formula. Puerto Rico has no child tax credit under Puerto Rican tax law. Puerto Rican residents with three or more qualifying children may claim the federal ACT C under the alternative formula, but only if they file Form 1040 -SS with the Internal Revenue Service (IRS). Residents of mirror-code territories (Guam, the Commonwealth of the Northern Mariana Islands, and the U.S. Virgin Islands) may claim the child credit (including the ACT C) under both the earned income formula and the alternative formula as part of their respective territorial systems. T he T reasury covers the cost of any amount of the ACT C provided to mirror-code territory residents under the alternative formula (it is unclear if the T reasury also covers the cost of the ACT C under the earned income formula). Congressional Research Service 2 link to page 7 The Child Tax Credit: How It Works and Who Receives It Overview of Current Credit Each of the key parameters of the child tax credit as in effect from 2018 through 2025 is described in more detail below. The legislative changes made to the child tax credit by P.L. described in more detail below. The legislative changes made to the child tax credit by P.L.
115-97 have significantly expanded the child tax credit, especial y for upper-income taxpayers, as 115-97 have significantly expanded the child tax credit, especial y for upper-income taxpayers, as
il ustrated i il ustrated in Figure 1.
Figure 1. Child Tax Credit Amount by Income Level

Source: Internal Revenue Code (IRC) Section 24. Internal Revenue Code (IRC) Section 24.
Notes: This is a stylized example assuming the taxpayer has one qualifying child. In actuality, the ACTC is This is a stylized example assuming the taxpayer has one qualifying child. In actuality, the ACTC is
calculated based on earned income and the credit is phased down based on modified adjusted gross income calculated based on earned income and the credit is phased down based on modified adjusted gross income
(MAGI). Married refers to married taxpayers filing joint returns. The “notch” in the graph when the credit (MAGI). Married refers to married taxpayers filing joint returns. The “notch” in the graph when the credit
amount equals $1,400 (the vertical axis) occurs when the maximum ACTC amount has been reached. amount equals $1,400 (the vertical axis) occurs when the maximum ACTC amount has been reached.
Maximum Credit per Child
Eligible Eligible familiestaxpayers can claim a child tax credit and reduce their federal income tax liability by up to can claim a child tax credit and reduce their federal income tax liability by up to
$2,000 per qualifying child.$2,000 per qualifying child.1 The maximum credit a The maximum credit a familytaxpayer can receive is equal to the number of can receive is equal to the number of
qualifying children a taxpayer has, multiplied by $2,000. For example, a qualifying children a taxpayer has, multiplied by $2,000. For example, a familytaxpayer with two with two
qualifying children may be eligible for a $4,000 credit. qualifying children may be eligible for a $4,000 credit. FamiliesTaxpayers may receive the child tax credit may receive the child tax credit
as a reduction in tax liability (the nonrefundable portion of the credit), a refundable credit (the as a reduction in tax liability (the nonrefundable portion of the credit), a refundable credit (the

1 T he child tax credit can be found in Section 24 of the Intern al Revenue Code (26 U.S.C. §24).
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The Child Tax Credit: Current Law

amount of the credit in excess of amount of the credit in excess of income tax liability), or a combination of both.tax liability), or a combination of both.24 The refundable The refundable portion
portion of the credit—the ACTC—is discussed in the subsequent section. of the credit—the ACTC—is discussed in the subsequent section.
Beginning in 2026, the maximum amount of the credit is scheduled to revert to $1,000 per
qualifying child.
The Nonrefundable $500 Credit for
Maximum Additional Child Tax
Non-Child Tax Credit Dependents
Credit (ACTC) per Child, the
At the end of 2017, President Trump signed into law
Refundability Threshold and
P.L. 115-97,3 which made numerous changes to the
federal income tax for individuals and businesses.4 As
Refundability Rate
discussed in this report, the law made numerous
For taxpayers with little or no federal income
changes to the child tax credit. The law also created a
new temporary credit for non-child tax-credit-eligible
tax liability, they wil be eligible for little if
dependents.
any of the nonrefundable portion of the child
This credit is equal to $500 per non-child credit-eligible
tax credit. Instead, they may be eligible to
dependent. The amount is not annual y adjusted for
receive the child tax credit as a refundable
inflation. The phaseout parameters of the child credit
credit. The refundable portion of the child tax
(e.g., phaseout thresholds of $400,000 married filing
credit is often referred to as the additional
jointly, $200,000 other taxpayers, 5% phaseout rate)
apply to the family credit. As discussed below, while
child tax credit or ACTC. The amount of the
P.L. 115-97 imposes a new Social Security number
4 Importantly, even if the credit both reduces tax liability and then is received as a ref und, the total value of the nonrefundable and refundable portion of the credit cannot exceed $ 2,000 per child multiplied by the number of qualifying children. Hence, if a family with two children and a $1,500 tax liability is eligible for a $2,000 child tax credit, $1,500 of their credit will reduce their tax liability to zero (the nonrefundable portion) and the family may receive up to $500 of child tax credit as a refundable credit, depending on their income. Congressional Research Service 3 The Child Tax Credit: How It Works and Who Receives It Beginning in 2026, the maximum amount of the credit is scheduled to revert to $1,000 per qualifying child. 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 wil be eligible for little if any of the nonrefundable portion of the child tax credit. Instead, they may be eligible to receive the refundable portion of child tax credit. The refundable portion of the child tax credit is often referred to as the additional child tax credit or ACTC. The amount of the refundable child tax refundable child tax credit is general y
(SSN) requirement for qualifying children being claimed
calculated using the “earned income formula”5
under the child tax credit, the law does not statutorily
credit is general y calculated using the “earned income formula”5 up to the maximum ACTC up to the maximum ACTC amount of $1,400 per qualifying child. Under the earned income formula, a taxpayer amount of $1,400
impose a similar requirement on non-child credit-
per qualifying child.
eligible dependents.

This credit is general y available for dependents not
Under the earned income formula, a taxpayer
eligible for the child tax credit. Non-child credit-eligible
may claim an ACTC equal to 15% of the
dependents excludes otherwise eligible dependents
may claim an ACTC equal to 15% of the family’s earned income in excess of $2,500, family’s earned income in excess of $2,500,
who are not U.S. citizens and are residents of Mexico
or Canada.
up to the maximum ACTC amount (i.e., up to
This provision is scheduled to be in effect from 2018
$1,400 multiplied up to the maximum ACTC amount (i.e., up to $1,400 multiplied by the number of qualifying by the number of qualifying
through the end of 2025.
children). The $2,500 amount is referred to as children). The $2,500 amount is referred to as
the refundability threshold; the 15% is referred the refundability threshold; the 15% is referred
to as the refundability rate. If a taxpayer’s earnings to as the refundability rate. If a taxpayer’s earnings are below the refundability threshold, they are ineligible for the ACTC. For every dollar of earnings above this amount, the value of the taxpayer’s ACTC increases by 15 cents, up to the maximum amount of the credit ($1,400 per qualifying child). For purposes of calculating the ACTC, earned income is defined as wages, tips, and other compensation included in gross income. It also includes net self-employment income (self-employment income after deduction of one-half of Social Security payroll taxes paid by a self-employed individual). Beginning in 2026, the refundability threshold is scheduled to increase to $3,000 and the maximum ACTC per child (the amount that exceeds income tax liability) is scheduled to decrease to $1,000 per child. The Phaseout Threshold and Phaseout Rate The child tax credit phases out for higher-income families. The $2,000-per-child value of the credit fal s by a certain amount as a family’s income rises. Specifical y, for every $1,000 of modified adjusted gross income (MAGI)6 above a threshold amount, the credit fal s by $50—or effectively by 5% of MAGI above the threshold. The threshold amount depends on a taxpayer’s filing status, and equals $200,000 for single parents and married taxpayers filing separate returns, and $400,000 for married taxpayers filing joint returns. The actual income level at which the credit is entirely phased out (i.e., equals zero) depends on the number of qualifying children a taxpayer has. General y, it takes $40,000 of MAGI above the phaseout threshold to completely are below the refundability threshold, they are

2 Importantly, even if the credit both reduces tax liability and then is received as a ref und, the total value of the
nonrefundable and refundable portion of the credit cannot exceed $ 2,000 per child multiplied by the number of
qualifying children. Hence, if a family with two children and a $1,500 tax liability is eligible for a $2,000 child tax
credit, $1,500 of their credit will reduce their tax liability to zero (the nonrefundable portion) and the family may
receive up to $500 of child tax credit as a refundable credit, depending on their income.
3 T he original title of the law, the T ax Cuts and Jobs Act, was stricken before final passage because it violated what is
known as the Byrd rule, a procedural rule that can be raised in the Senate when bills, like the tax bill, are considered
under the process of reconciliation. T he actual title of the law is “T o provide for reconciliation pursuant to titles II and
V of the concurrent resolution on the budget for fiscal year 2 018.” For more information on the Byrd rule, see CRS
Report RL30862, The Budget Reconciliation Process: The Senate’s “Byrd Rule”, by Bill Heniff Jr.
4 For more information on the changes made to the tax code by P.L. 115-97, see CRS Report R45092, The 2017 Tax
Revision (P.L. 115-97): Com parison to 2017 Tax Law, coordinated by Molly F. Sherlock and Donald J. Marples.
5 Families with three or more children may choose to calculate the refundable portion of the child tax credit using an 5 Families with three or more children may choose to calculate the refundable portion of the child tax credit using an
alternative formula. If the amount calculated under the alternative formula is larger than alternative formula. If the amount calculated under the alternative formula is larger than th ethe refundable credit refundable credit
calculated under the earned income formula, the larger credit can be claimed. T he alter native formula is calculated as calculated under the earned income formula, the larger credit can be claimed. T he alter native formula is calculated as
the excess of a taxpayer’s payroll taxes (including one-half of any self-employment taxes) over their earned income the excess of a taxpayer’s payroll taxes (including one-half of any self-employment taxes) over their earned income t axtax
credit (EIT C), not to exceed the maximum credit amount. However, lower-income taxpayers will often pay less in credit (EIT C), not to exceed the maximum credit amount. However, lower-income taxpayers will often pay less in
payroll taxes than they will receive in the EIT C. T his is because payroll taxes are equal to 7.65% of earnings, while the payroll taxes than they will receive in the EIT C. T his is because payroll taxes are equal to 7.65% of earnings, while the
EIT C equals up to 45% of earnings. EIT C equals up to 45% of earnings.
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The Child Tax Credit: Current Law

ineligible for the ACTC. For every dollar of earnings above this amount, the value of the
taxpayer’s ACTC increases by 15 cents, up to the maximum amount of the credit ($1,400 per
qualifying child). For purposes of calculating the ACTC, earned income is defined as wages, tips,
and other compensation included in gross income. It also includes net self-employment income
(self-employment income after deduction of one-half of Social Security payroll taxes paid by a
self-employed individual).
Beginning in 2026, the refundability threshold is scheduled to increase to $3,000 and the
maximum ACTC per child (the amount that exceeds income tax liability) is scheduled to decrease
to $1,000 per child.
The Phaseout Threshold and Phaseout Rate
The child tax credit phases out for higher-income families. The $2,000-per-child value of the
credit fal s by a certain amount as a family’s income rises. Specifical y, for every $1,000 of
modified adjusted gross income (MAGI)6 above a threshold amount, the credit fal s by $50—or
effectively by 5% of MAGI above the threshold. The threshold amount depends on a taxpayer’s
filing status, and equals $200,000 for single parents and married taxpayers filing separate returns,
and $400,000 for married taxpayers filing joint returns. The actual income level at which the
credit is entirely phased out (i.e., equals zero) depends on the number of qualifying children a
taxpayer has. General y, it takes $40,000 of MAGI above the phaseout threshold to completely
phase out $2,000 of credit. For example, the credit wil completely phase out for a married couple
with two children if their MAGI exceeds $480,0006 With respect to the child tax credit, modified adjusted gross income (MAGI) is equal to Adjusted Gross Income (AGI) increased by foreign earned income of U.S. Citizens abroad, including income earned in Guam, American Samoa, the Northern Mariana Islands, and Puerto Rico. For more information on AGI see CRS Report RL30110, Federal Individual Incom e Tax Term s: An Explanation , by Mark P. Keightley and CRS Report R45145, Overview of the Federal Tax System in 2020, by Molly F. Sherlock and Donald J. Marples. Congressional Research Service 4 The Child Tax Credit: How It Works and Who Receives It phase out $2,000 of credit. For example, the credit wil completely phase out for a married couple with two children if their MAGI exceeds $480,000. The Nonrefundable $500 Credit for Non-Child-Tax-Credit Dependents At the end of 2017, President Trump signed into law P.L. 115-97, which made numerous changes to the federal income tax for individuals and businesses.7 One of these changes was the creation of a new temporary credit for non-child-tax-credit-eligible dependents. The credit is referred to by the IRS as the “credit for other dependents.” This credit is equal to $500 per non-child-credit-eligible dependent. The amount is not annual y 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. As discussed below, while P.L. 115-97 imposes a new Social Security number (SSN) requirement for qualifying children being claimed under the child tax credit, the law does not statutorily impose a similar requirement on non-child-credit-eligible dependents. This credit is general y available for dependents not eligible for the child tax credit. Non-child-credit-eligible dependents excludes otherwise eligible dependents who are not U.S. citizens and are residents of Mexico or Canada. This provision is scheduled to be in effect from 2018 through the end of 2025. .
Definition of a Qualifying Child
In order to claim the child tax credit, a taxpayer’s child must be considered “a qualifying child” In order to claim the child tax credit, a taxpayer’s child must be considered “a qualifying child”
of the taxpayer and meet several requirements, which may differ from eligibility requirements for and meet several requirements, which may differ from eligibility requirements for other child-other child-
related tax benefits: related tax benefits:
1. The child must be under 17 years of age by the end of the year. (In other words, if 1. The child must be under 17 years of age by the end of the year. (In other words, if
the child turns 17 years old on December 31, 2020, the taxpayer cannot claim the child turns 17 years old on December 31, 2020, the taxpayer cannot claim
them as a qualifying child for the child tax credit on their 2020 income tax them as a qualifying child for the child tax credit on their 2020 income tax
return.) return.)
2. The child must be eligible to be claimed as a dependent on the taxpayer’s return. 2. The child must be eligible to be claimed as a dependent on the taxpayer’s return.78
Specifical y: Specifical y:
a. The child must be the taxpayer’s son, daughter, grandson, granddaughter, The child must be the taxpayer’s son, daughter, grandson, granddaughter,
stepson, stepdaughter, niece, nephew, or an eligible foster child of the stepson, stepdaughter, niece, nephew, or an eligible foster child of the
taxpayer. taxpayer.

6 With respect to the child tax credit, modified adjusted gross income (MAGI) is equal to Adjusted Gross Income (AGI)
increased by foreign earned income of U.S. Citizens abroad, including income earned in Guam, American Samoa, the
Northern Mariana Islands, and Puerto Rico. For more information on AGI see CRS Report RL30110, Federal
Individual Incom e Tax Term s: An Explanation , by Mark P. Keightley and Jeffrey M. Stupak ; and  The child must live at the same principal residence as the taxpayer for more than half the year for which the taxpayer wishes to claim the credit.  The child cannot provide more than half of their own support during the tax year. 3. The child must be a U.S. citizen or national. If they are not a U.S. citizen or national, they must be a resident of the United States.9 The age and citizenship requirements for a qualifying child for the child tax credit differ from the definition of qualifying child used for other tax benefits and can cause confusion among 7 For more information on the changes made to the tax code by P.L. 115-97, see CRS Report R45092, The 2017 Tax Revision (P.L. 115-97): Com parison to 2017 Tax Law, coordinated CRS Report
RL32808, Overview of the Federal Tax System , by Molly F. Sherlock and Donald J. Marples. by Molly F. Sherlock and Donald J. Marples.
78 See the definition of a qualifying child for See the definition of a qualifying child for hethe dependent exemption in IRC dependent exemption in IRC §152(c). From 2018 to 2025, due to the 152(c). From 2018 to 2025, due to the
temporary suspension of the dependent exemption enacted as part oftemporary suspension of the dependent exemption enacted as part of P.L. 115-97, taxpayers may no longer claim their P.L. 115-97, taxpayers may no longer claim their
children as dependents for purposes of the dependent exemption, although this does notchildren as dependents for purposes of the dependent exemption, although this does not affect eligibility for the credit affect eligibility for the credit
and the definition of a dependent remains unchanged by the law. IRC and the definition of a dependent remains unchanged by the law. IRC Section §151(d)(5)(B). 9 See IRC §24(c)(2). Congressional Research Service 5 link to page 12 The Child Tax Credit: How It Works and Who Receives It 151(d)(5)(B).
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b. The child must live at the same principal residence as the taxpayer for more
than half the year for which the taxpayer wishes to claim the credit.
c. The child cannot provide more than half of their own support during the tax
year.
3. The child must be a U.S. citizen or national. If they are not a U.S. citizen or
national, they must be a resident of the United States.8
The age and citizenship requirements for a qualifying child for the child tax credit differ from the
definition of qualifying child used for other tax benefits and can cause confusion among
taxpayers. For example, a taxpayer’s 18-year-old child may meet al the requirements for a taxpayers. For example, a taxpayer’s 18-year-old child may meet al the requirements for a
qualifying child for the EITC, but wil be too old to be eligible for the child tax credit. qualifying child for the EITC, but wil be too old to be eligible for the child tax credit.
ID Requirements to Claim the Child Tax Credit
The statute requires that taxpayers who intend to claim the child tax credit provide a valid The statute requires that taxpayers who intend to claim the child tax credit provide a valid
taxpayer identification number (TIN) for each qualifying child on their federal income tax return. taxpayer identification number (TIN) for each qualifying child on their federal income tax return.
Under a temporary change in effect from 2018 through the end of 2025, the child’s TIN must be a Under a temporary change in effect from 2018 through the end of 2025, the child’s TIN must be a
work-authorized Social Security number (SSN). The SSN must be issued before the due date of work-authorized Social Security number (SSN). The SSN must be issued before the due date of
the tax return. Failure to provide the child’s SSN may result in the taxpayer being denied the the tax return. Failure to provide the child’s SSN may result in the taxpayer being denied the
credit (both the nonrefundable and refundable portions of the credit). credit (both the nonrefundable and refundable portions of the credit).
Absent any legislative changes, beginning in 2026, a valid TIN for qualifying children wil Absent any legislative changes, beginning in 2026, a valid TIN for qualifying children wil
include individual taxpayer identification numbers (ITINs) and Social Security numbers (SSNs). include individual taxpayer identification numbers (ITINs) and Social Security numbers (SSNs).
ITINs are issued by the Internal Revenue Service (IRS) to noncitizens who do not have and are ITINs are issued by the Internal Revenue Service (IRS) to noncitizens who do not have and are
not eligible to receive SSNs. ITINs are supplied solely so that noncitizens are able to comply with not eligible to receive SSNs. ITINs are supplied solely so that noncitizens are able to comply with
federal tax law, and do not affect immigration status. federal tax law, and do not affect immigration status.
In addition, in order to claim the child tax credit in a given tax year, the taxpayer must also In addition, in order to claim the child tax credit in a given tax year, the taxpayer must also
provide their own taxpayer identification number that must be issued before the due date of the provide their own taxpayer identification number that must be issued before the due date of the
tax return. This is a permanent ID requirement that is not scheduled to expire. tax return. This is a permanent ID requirement that is not scheduled to expire.
Disallowance of the Credit Due to Fraud or Reckless Disregard of
the Rules
A tax filer is barred from claiming the child tax credit for a period of 10 years after the IRS makes A tax filer is barred from claiming the child tax credit for a period of 10 years after the IRS makes
a final determination to reduce or disal ow a tax filer’s child tax credit because that individual a final determination to reduce or disal ow a tax filer’s child tax credit because that individual
made a fraudulent child tax credit claim. A tax filer is barred from claiming the child tax credit for made a fraudulent child tax credit claim. A tax filer is barred from claiming the child tax credit for
a period of two years after the IRS determines that the individual made a child tax credit claim a period of two years after the IRS determines that the individual made a child tax credit claim
“due to reckless and intentional disregard of [the] rules” of the child tax credit, but that disregard “due to reckless and intentional disregard of [the] rules” of the child tax credit, but that disregard
was not found to be due to fraud. was not found to be due to fraud.910
Data on the Child Tax Credit
Estimates from the Internal Revenue Service (IRS) and Tax Policy Center highlight several key Estimates from the Internal Revenue Service (IRS) and Tax Policy Center highlight several key
aspects of the child tax credit: aspects of the child tax credit:
  The total dollar amount of the child tax credit has grown over time with the largest increase to date occurring in 2018: Data : Data
from the IRS indicate that the from the IRS indicate that the total dollar amount of the child tax credit in real terms has increased fivefold since enactment, with the largest increase occurring between 2017 and 2018, after the TCJA; see Figure 2. Initial y, the total dollar amount of the credit grew modestly between 1998 and 2003 in real terms, with increases reflecting, in part, legislative expansions of the credit. More recently, prior to the TCJA, the total credit amount fel in real terms. Then, between 2017 and 2018, total credit dollars more than doubled.  In 2018, the majority of aggregate credit dollars were received by taxpayers total dollar amount of the child tax credit has

8 See IRC 24 (c)(2).
9 See IRC Section 24(g).
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link to page 10 The Child Tax Credit: Current Law

increased significantly since enactment. These estimates do not include the
impact of recent legislative changes made by P.L. 115-97, which, al else being
equal, wil expand the total cost of this tax benefit.
 In 2019, the majority of the tax benefit went to taxpayers with income
with income between $7550,000 and $500,000: The Tax Policy Center (TPC) estimates that the
majority of child tax credit dollars in 2019 went to taxpayers with more than
$75,000 of income, with nearly one-third of the benefit going to IRS data indicate that in 2018, the 10 See IRC §24(g). Congressional Research Service 6 link to page 13 link to page 14 link to page 12 The Child Tax Credit: How It Works and Who Receives It majority (60%) of total credit dollars went to taxpayers with income over $50,000, with nearly one-quarter of al child tax credit dollars (22%) received by taxpayers with taxpayers with
income between $100,000 and $200,000income between $100,000 and $200,000; see Figure 3..10 In comparison, a relatively smal In comparison, a relatively smal
share went to share went to very-lowthe lowest-income or -income or very-high-highest-income taxpayers. income taxpayers.
  In 2019, approximatelymore than 90% of taxpayers with children and income between
$30,000 and $500,000 received the child tax credit, with lower shares for the lowest- and highest-income taxpayers. The Tax Policy Center The Tax Policy Center
(TPC) estimates that across most income groups, the (TPC) estimates that across most income groups, the vast majority of taxpayers majority of taxpayers
with children received the child tax credit in 2019with children received the child tax credit in 2019.; see Figure 4.11 About half of the lowest- About half of the lowest-
income income taxpayers taxpayers with children received the credit and received the credit and virtual y noabout a quarter of taxpayers with children taxpayers with children and
who have income over $income over $1 mil ion 500,000 received the credit. received the credit.
  In 2019, taxpayers with income between $100,000 and $200,000 on average
received the largest creditreceived the largest credit on average. The Tax Policy Center (TPC) estimates that The Tax Policy Center (TPC) estimates that
taxpayers taxpayers with children and income between $100,000 and $200,000 with children and income between $100,000 and $200,000 on average
received a credit of over $3,000 received a credit of over $3,000 in 2019on average in 2019; see Figure 5. Taxpayers with children with income . Taxpayers with children with income
under $20,000 receivedunder $20,000 received on average a credit of less than $1,000 a credit of less than $1,000 on average, while the , while the
wealthiesthighest-income taxpayers with children received taxpayers with children received on average a credit of $ a credit of $10649 on average..
Total Child Tax Credit Dollars, 1998-2017
IRS2018 The IRS provides estimates of the estimates of the amount of total child tax credit dollars total child tax credit dollars (from 1998 through 2018 (the most recent year available). These data, inflation adjusted to inflation adjusted to 20172018 dollars, indicate that the value of dollars)
received by taxpayers indicate that this this tax benefit has increased fivefold since enactment, from a total of $23tax benefit has more than doubled in size since enactment,
from aggregate receipt of $22 bil ion in 1998 to approximately $ bil ion in 1998 to approximately $51118 bil ion in bil ion in 20172018, with the largest increase occurring in 2018, as il ustrated , as il ustrated
inin Figure 2.

10 T he T ax Policy Center measure of income used in their analysis expanded cash income (ECI) which is defined as
cash income plus (1) tax-exempt employee and employer contributions to health insurance and other fringe benefits, (2)
employer contributions to tax-preferred retirement accounts, (3) income earned within retirement accounts, and (4)
food stamps. For more information, see http://www.taxpolicycenter.org/resources/income-measure-used-distributional-
analyses-tax-policy-center.
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Figure 2. Total Real Child Tax Credit Dollars, 1998-2017

Source: IRS Statistics of Income Table 3.3 and the Bureau of Labor Statistics CPI-U.
Note: The Joint Committee on Taxation estimates that the temporary changes to the child tax credit wil cost
$573.4 bil ion between 2018 and 2026. (This estimate does not include the budgetary impact of the SSN
requirement, which is estimated to save $29.8 bil ion over the same time period.) JCX-67-17.
A significant component in the growth of the child tax credit has been the growth in the
refundable portion of the credit, which now comprises approximately half of child tax credit
dollars received by taxpayers. (For an overview of the legislative changes that have influenced
the expansion of both the refundable and nonrefundable portions of the credit, see CRS Report
R45124, The Child Tax Credit: Legislative History, by Margot L. Crandal -Hollick.) The most
recent IRS data available are for the 2017 tax year (i.e., 2017 income tax returns filed in 2018),
and hence do not include the impact of the legislative changes made to the credit by P.L. 115-97.
As previously discussed, these legislative changes are currently scheduled to be in effect from
2018 through the end of 2025. The Joint Committee on Taxation has estimated that the
modification to the child tax credit formula wil cost an estimated $573.4 bil ion between 2018
and 2026, or on average $64 bil ion a year.11 (These estimates include the budgetary cost of the
$500 nonrefundable credit for non-child tax-credit-eligible dependents.) JCT also estimates that
the new SSN requirement wil save $29.8 bil ion between 2018 and 2026, or on average $3
bil ion per year.

11 Joint Committee on T axation, Estimated Budget Effects of the Conference Agreement for HR.1, the “Tax Cuts and
Jobs Act”, December 18, 2017, JCX-67-17.
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The Child Tax Credit: Current Law

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 2019 under current law (i.e., including the changes made by P.L. 115-97).12 These
estimates include the $500 credit for non-child tax-credit-eligible dependents. TPC estimates that
nearly one-third of al child tax credit dollars (30.5%) went to Initial y, the credit grew modestly between 1998 and 2003 in real terms, with increases reflecting, in part, legislative expansions to the credit. More recently, prior to the TCJA, the total credit amount fel in real terms. Between 2017 and 2018, total credit dollars more than doubled from $52 bil ion to $118 bil ion between 2017 and 2018. The ACTC expansions under the TCJA resulted in the total amount of the refundable portion of the credit growing from $25 bil ion to $36 bil ion (a 44% increase) between 2017 and 2018. The increased credit amount and increased phaseout amount under the law contributed to a substantial expansion of the nonrefundable portion of the credit. Aggregate dollars of the nonrefundable portion of the credit tripled from $27 bil ion in 2017 to $81 bil ion in 2018. The $500 credit for non-child-credit-eligible dependents also contributed to the increase in the nonrefundable amount estimated by the IRS, although less so than the expansions to the child credit. (The IRS refers to this benefit as the nonrefundable credit for other dependents.) Data on the breakdown of the nonrefundable portion between the child credit and the credit for other dependents are not available. However, estimates from the Tax Policy Center suggest that most dependents—nearly four out of five—would be child-credit-eligible dependents.12 In addition, the value of the other 11 T he T ax Policy Center measure of income used in its analysis is expanded cash income (ECI), which is defined as cash income plus (1) tax-exempt employee and employer contributions to health insurance and other fringe benefits, (2) employer contributions to tax-preferred retirement accounts, (3) income earned within retirement accounts, and (4) food st amps. For more information, see http://www.taxpolicycenter.org/resources/income-measure-used-distributional-analyses-tax-policy-center. 12 T he T ax Policy Center estimated that in 2019, there were about 95 million dependents of taxpayers with income under $500,000. Of those, about 70 million , or about 73%, were children under 17 years old. Similar analysis by CRS found about 76% of dependents were under 17 years old. For more information, see T ax Policy Center, T20-0132 - Congressional Research Service 7 link to page 13 The Child Tax Credit: How It Works and Who Receives It dependent credit itself is smal er than the child credit ($500 as compared to $2,000). These data suggest that the majority of the $81 bil ion nonrefundable portion is from the child credit. Figure 2. Total Real Child Tax Credit Dollars, 1998-2018 Source: IRS Statistics of Income Table 3.3 and the Bureau of Labor Statistics CPI-U. Note: Items may not sum to total due to rounding. The data for the nonrefundable portion of the child tax credit also includes the amount of the $500 nonrefundable credit for non -child-tax-credit-eligible dependents. Total Child Tax Credit Dollars by Income Level The IRS also provides estimates of the child credit by taxpayers’ income level (in terms of adjusted gross income, or AGI) in 2018. These figures include the $500 credit for non-child-tax-credit-eligible dependents. The majority (60%) of total credit dollars were received by taxpayers with income over $50,000, with nearly one-quarter of al child tax credit dollars (22%) received by taxpayers with income between taxpayers with income between
$100,000 and $200,000, as il ustrated i$100,000 and $200,000, as il ustrated in Figure 3. One-quarter of al child tax credit dollars
(25.0%) went to taxpayers with income under $50,000.
Four in ten child credit dollars (40%) were received by taxpayers with income under $50,000, with almost 10% of total credit dollars received by those with income under $20,000. Lower-income taxpayers general y receive a credit of $1,400 or less per child, depending on their Lower-income taxpayers general y receive a credit of $1,400 or less per child, depending on their
earnings. In contrast, higher-income taxpayers with sufficient income tax liability receive a credit earnings. In contrast, higher-income taxpayers with sufficient income tax liability receive a credit
of $2,000 per child. For example, a single parent with two children and $15,000 of income is of $2,000 per child. For example, a single parent with two children and $15,000 of income is
eligible for a $1,875 credit (received entirely as the refundable child crediteligible for a $1,875 credit (received entirely as the refundable child credit, or ACTC), less than or ACTC), less than
the maximum ACTC for two children of $2,800 (the maximum ACTC for two children of $2,800 (2x2 x $1,400) and less than the maximum credit for $1,400) and less than the maximum credit for
two children of $4,000 (2 x $2,000). The highest-income taxpayers do not receive a credit due two children of $4,000 (2 x $2,000). The highest-income taxpayers do not receive a credit due to
to the credit phaseout. Alternative Definitions of an Eligible Dependent for Senate Recovery Rebate in CARES Act, By Expanded Cash Income Level, 2019, April 15, 2020, https://www.taxpolicycenter.org/model-estimates/senate-republican-economic-recovery-proposal-march-2020/t20-0132-alternative; and CRS Insight IN11358, Older Children, Adult Dependents, and Eligibility for the 2020 Recovery Rebates, by Margot L. Crandall-Hollick. Congressional Research Service 8 link to page 14 The Child Tax Credit: How It Works and Who Receives It Figure 3. Share of Total Child Tax Credit Dollars by Income, 2018 Source: IRS Statistics of Income Table 3.3. Note: The data for the nonrefundable portion of the child tax credit also includes the amount of the $500 nonrefundable credit for non-child-tax-credit-eligible dependents. Income is adjusted gross income (AGI). Share of Taxpayers with Children Receiving the Child Tax Credit The Tax Policy Center provides estimates on the share of taxpayers with children the credit phaseout.
Figure 3. Estimated Share of Total Child Tax Credit Dollars by Income Level, 2019

Source: Tax Policy Center Model T20-0091.
Notes: Income is defined as expanded cash income (ECI), which equals cash income plus certain other tax-
exempt forms of income and benefits like food stamps. These estimates include the $500 credit for non -child-tax
credit eligible dependents.

12 For the purposes of these estimates that T ax Policy Center uses a broad measure of pretax income called “expanded
cash income” or ECI. ECI equals cash income plus (1) tax-exempt employee and employer contributions to health
insurance and other fringe benefits, (2) employer contributions to tax-preferred retirement accounts, (3) income earned
within retirement accounts, and (4) food stamps. According to T PC, “[t]he primary motivation for adopting this broader
income measure was to characterize differences in th e economic status of individual taxpayers more completely and
accurately.” For more information, see http://www.taxpolicycenter.org/resources/income-measure-used-distributional-
analyses-tax-policy-center.
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Share of Taxpayers with Children Receiving the Child Tax Credit
TPC estimated the share of taxpayers with children and al taxpayers that received the child tax that received the child tax
credit in 2019. The estimates indicate that among taxpayers with children, almost credit in 2019. The estimates indicate that among taxpayers with children, almost al taxpayers
al —90%—received the child tax credit. More than 90% of taxpayers with children received the child tax credit. More than 90% of taxpayers with children and who had income between income between
$40$30,000 and $500,000 received the child tax credit. In contrast, less than half ,000 and $500,000 received the child tax credit. In contrast, less than half (47.8(48%) of %) of
taxpayers with children taxpayers with children andwho had income under $10,000 received the child tax credit in income under $10,000 received the child tax credit in 2019, and
about one-third (38.62019. About one-quarter (27%) of taxpayers with children %) of taxpayers with children and income between $500,000 and $1 mil ionwho had income greater than $500,000
received the credit, as il ustrated i received the credit, as il ustrated in Figure 4.
Fewer low-income families with children Fewer low-income families with children benefit fromreceive the child tax credit since taxpayers with the child tax credit since taxpayers with
income under $2,500 (the refundability threshold) are not eligible for the refundable portion of income under $2,500 (the refundability threshold) are not eligible for the refundable portion of
the credit. the credit. In contrast, due Due to the phaseout of the credit at higher income levels, to the phaseout of the credit at higher income levels, virtual y no
taxpayers with children and income over $1 mil ion are currently eligible to claim itabout a quarter (27%) of taxpayers with children who have income over $500,000 receive the credit. .
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Figure 4. Estimated Share of Taxpayers with Children and All Taxpayers
Receiving the Child Tax Credit by Income Level, 2019

Source: Tax Policy Center Model T20-0091. Tax Policy Center Model T20-0091.
Notes: Taxpayers include both filers and nonfilers. Notes: Income is defined as expanded cash income (ECI), which equals cash incomeIncome is defined as expanded cash income (ECI), which equals cash income plus certain other tax-plus certain other tax-
exempt formsexempt forms of incomeof income and benefits likeand benefits like food stamps.food stamps. These estimates include the $500 credit for non-child-taxThese estimates include the $500 credit for non-child-tax
credit eligible -credit-eligible dependents. Taxpayers with children are those dependents. Taxpayers with children are those claiming claiming an exemption for children at home or an exemption for children at home or
away fromaway from home or with children qualifying for the child tax credit or earned incomehome or with children qualifying for the child tax credit or earned income tax credit (EITC). tax credit (EITC).
Average Child Tax Credit Amount
TPC TPC estimatedestimates the average child tax credit amount the average child tax credit amount by income level for taxpayers with children for taxpayers with children
and al taxpayers in 2019. Their estimateswas $2,370 in 2019.13 Estimates indicate that taxpayers with children and income indicate that taxpayers with children and income
between $100,000 and $200,000 received the largest credit on average—an estimated $3,040. between $100,000 and $200,000 received the largest credit on average—an estimated $3,040.
Taxpayers with children and income under $20,000 receivedTaxpayers with children and income under $20,000 received on average a credit of less than a credit of less than
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$1,000$1,000 on average, while the wealthiest , while the wealthiest taxpayers with children (income over $taxpayers with children (income over $1 million) on average
500,000) received a credit of $received a credit of $10649 on average. .
Lower-income taxpayers are eligible to receive a credit of up to $1,400 per child, although they Lower-income taxpayers are eligible to receive a credit of up to $1,400 per child, although they
may receive less depending on their earned income. In contrast, higher-income taxpayers, with may receive less depending on their earned income. In contrast, higher-income taxpayers, with
sufficient income tax liability, are eligible for up to a $2,000 credit per child. The highest-income sufficient income tax liability, are eligible for up to a $2,000 credit per child. The highest-income
taxpayers are ineligible for the credit due to the phaseout. taxpayers are ineligible for the credit due to the phaseout.
Figure 5. Estimated Average Child Tax Credit Amount by Income Level
for Taxpayers with Children and All Taxpayers, 2019

Source: Tax Policy Center Model T20-0091.
Notes: 13 IRS data on the average total child credit per taxpayer (the refundable and nonrefundable portion) are not available. T he IRS provides data for the nonrefundable child credit and refundable portion (number of tax returns and total credit amount), but does not provide data on the total credit. Hence, because a taxpayer can receive both the nonrefundable and refundable portion, one cannot calculate the average credit amount. Congressional Research Service 10 The Child Tax Credit: How It Works and Who Receives It Figure 5. Average Child Tax Credit for Taxpayers with Children by Income, 2019 Source: Tax Policy Center Model T20-0091. Notes: Taxpayers include both filers and nonfilers. Income is defined as expanded cash income (ECI), which equals cash incomeIncome is defined as expanded cash income (ECI), which equals cash income plus certain other tax-plus certain other tax-
exempt formsexempt forms of incomeof income and benefits likeand benefits like food stamps.food stamps. These estimates include the $500 credit for nonThese estimates include the $500 credit for non -child-tax-child-tax
credit eligible -credit-eligible dependents. Taxpayers with children are those dependents. Taxpayers with children are those claiming claiming an exemption for children at home or an exemption for children at home or
away fromaway from home or with children qualifying for the child tax credit or earned incomehome or with children qualifying for the child tax credit or earned income tax credit (EITC). tax credit (EITC).
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Author Information

Margot L. Crandall-Hollick Margot L. Crandall-Hollick

Acting Section Research Manager Acting Section Research Manager


Acknowledgments
This report was updated in June 2020 with the assistance of Joseph Hughes, research assistant .
. Congressional Research Service 11 The Child Tax Credit: How It Works and Who Receives It
Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan
shared staff to congressional committees and Members of Congress. It operates solely at the behest of and shared staff to congressional committees and Members of Congress. It operates solely at the behest of and
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Congressional Research Service Congressional Research Service
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