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December 19, 2017
The Child Tax Credit and the Conference Report to H.R. 1
The Credit for 2017
each qualifying child on their federal income tax return.
In 2017, the child tax credit (CTC) allows taxpayers to
Valid TINs include individual taxpayer identification
reduce their federal income tax liability by up to $1,000 per
numbers (ITINs) and Social Security numbers (SSNs).
qualifying child. A family with four qualifying children, for
ITINs are issued by the Internal Revenue Service (IRS) to
example, is eligible for a credit of up to $4,000. If the value
noncitizens who do not have and are not eligible to receive
of the credit exceeds the amount of tax a family owes, the
SSNs. ITINs are supplied solely so that noncitizens are able
family may be eligible to receive a full or partial refund of
to comply with federal tax law, and do not affect
the difference. The total refund amount is calculated as 15%
immigration status.
(the refundability rate) of earnings that exceed $3,000 (the
refundability threshold), up to the maximum amount of the
History and Background
credit. The refundable portion of the child tax credit (the
The child tax credit was enacted as part of the Taxpayer
portion that exceeds a taxpayer’s income tax liability) is
Relief Act of 1997 (P.L. 105-34). When it initially went
referred to as the additional child tax credit (ACTC). Low-
into effect in 1998, the credit was a $500-per-child
and moderate-income taxpayers may receive all or some of
nonrefundable credit, which primarily benefited middle-
the child tax credit as the ACTC.
and upper-middle-income families. Since enactment,
various laws have modified key parameters of the credit,
The credit phases out for higher-income taxpayers. For
expanding the availability of the benefit to more low-
married couples filing jointly, the credit begins to phase out
income families while also increasing the amount of the tax
when income exceeds $110,000; for most other taxpayers,
credit. The first significant change to the child tax credit
this threshold is $75,000. It takes $20,000 of income above
occurred with the enactment of the Economic Growth and
each threshold to phase out $1,000 of the tax credit. Hence,
Tax Relief Reconciliation Act of 2001 (EGTRRA; P.L.
a married couple with one qualifying child will be ineligible
107-16). EGTRRA increased the amount of the credit over
for the credit if their income exceeds $130,000. If they have
time to $1,000 per child and made it partially refundable
two qualifying children, they will be ineligible for the credit
under the earned income formula.
if their income exceeds $150,000.
In 2008 and 2009, Congress passed legislation—the
Currently, the maximum credit per child, refundability
Emergency Economic Stabilization Act of 2008 (EESA;
threshold, and phase-out thresholds are not indexed for
P.L. 110-343) and the American Recovery and
inflation (NII). Table 1 provides an overview of key
Reinvestment Act of 2009 (ARRA; P.L. 111-5)—that
provisions of the child tax credit under current law.
further expanded the availability and amount of the credit to
taxpayers whose income was too low to either qualify for
Table 1. Parameters of the Child Tax Credit
the credit or be eligible for the full credit. ARRA lowered
the refundability threshold to its current level of $3,000 for
Parameter
Current Law
2009 through 2010. The ARRA provisions were
Max Credit Per Child
$1,000 (NII)
subsequently extended several times and made permanent
by the Protecting Americans from Tax Hikes (PATH) Act
Max Refundable Credit Per
$1,000 (NII)
(Division Q of P.L. 114-113).
Child
Cost
Refundability Threshold
$3,000 (NII)
Administrative data from the IRS show that the amount of
Refundability Rate
15%
aggregate credit dollars claimed by all taxpayers has grown
from roughly $15 billion in 1998 to nearly $55 billion in
Phase-Out Threshold
$75,000 unmarried (NAI)
2015, as illustrated in Figure 1. Roughly half the credit
$110,000 married* (NAI)
offsets income tax liability (the nonrefundable portion of
Phase-Out Rate
5%
the credit), and the other half exceeds income tax liability
(the refundable portion of the credit, or ACTC).
Source: Internal Revenue Code, 26 U.S.C. §24.
Notes: NII = not indexed for inflation. * = married filing jointly.
Generally, a qualifying child for the child tax credit is the
taxpayer’s dependent child who is under 17 years old the
entire year and who lives with the taxpayer for more than
half the year. In addition, the child must be a U.S. citizen or
a resident or national of the United States. The statute
requires that taxpayers who claim the child tax credit
provide a valid Taxpayer Identification Number (TIN) for
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The Child Tax Credit and the Conference Report to H.R. 1
Figure 1. Total Child Tax Credit Dollars, 1998-2015
The refundability rate (15%), the phase-out rate (5%), and
child age requirement are unchanged from current law.
In addition, the conference report would require taxpayers
to provide an SSN for any child for whom they claim the
credit. (The SSN must be issued before the due date of the
tax return.) Failure to provide the child’s current SSN may
result in the taxpayer being denied the credit (both the
nonrefundable and refundable portions of the credit). The
conference report to H.R. 1 also creates a $500
nonrefundable credit for each non-child dependent, which is
beyond the scope of this In Focus. A qualifying child who
is ineligible to receive the child tax credit because that child
did not have an SSN may nonetheless qualify for the
Source: IRS Statistics of Income.
nonrefundable $500 credit.
Distribution of Benefits
For most taxpayers, the amount of the credit would
The CTC is widely distributed across the income
increase, but by different amounts depending on income. In
distribution, with families at most income levels benefiting,
the example in Figure 3, taxpayers with income under
as illustrated in Figure 2. Lower-income families benefit
$17,000 would see the credit amount increase by $75 or
from the CTC because of its refundability. The benefit to
less; those with income between $36,000 and $110,000
upper-income families (e.g., those with income over
would see their credit amount increase by $2,000; and those
$200,000) is limited because the credit phases out at higher
with income between $150,000 and $400,000 would see an
income levels.
increase of $4,000.
Figure 2. Distribution of Total Child Tax Credit
Figure 3. Credit Amount by Income Level for a
Dollars by Adjusted Gross Income (AGI), 2015
Married Couple with Two Children Under Current
Law and the Conference Report to H.R.1
Source: IRS Statistics of Income, Table 3.3.
The Conference Report to H.R.1
Table 2 provides a summary of changes to the child tax
credit made by the conference report to H.R. 1 as of
December 18, 2017. Under the report, these changes would
Sources: CRS calculations based on current law and the conference
go into effect in 2018 and expire at the end of 2025.
report to H.R. 1.
Notes: Assumes all income is from earnings, earnings equal adjusted
Table 2. How the Conference Report to H.R.1
gross income (AGI), and the taxpayer claims the standard deduction.
Modifies the Child Tax Credit
Conference Report to H.R.1
The Joint Committee on Taxation (JCT) estimates the
Credit Parameter
(In effect 2018-2025)
expansion of the child tax credit would cost $573 billion
between 2018 and 2027 (this cost includes the $500 credit
Max Credit Per Child
$2,000 (NII)
for non-child dependents). Over that same time period, the
Max Refundable Credit Per
$1,400 (II-rounded to next lowest
SSN requirement would save nearly $30 billion. Changes to
Child per Child
multiple of $100)
the child tax credit are only one component of H.R. 1 and
do not necessarily indicate how this bill would affect
Refundability Threshold
$2,500 (NII)
income tax liabilities generally. Some families that receive
Phase-Out Threshold
$200,000 unmarried
a higher child tax credit under this bill could pay more in
$400,000 married* (NII)
taxes; others may pay less.
Sources: The conference report to H.R. 1.
Margot L. Crandall-Hollick, Specialist in Public Finance
Notes: NII = not indexed for inflation. II = indexed for inflation.
* = married filing jointly.
IF10793
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The Child Tax Credit and the Conference Report to H.R. 1
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