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INSIGHTi
The Child Tax Credit: How Would the Biden
Administration’s Proposed American Families
Plan Change the Child Tax Credit?
May 5, 2021
The American Rescue Plan Act (ARPA; P.L. 117-2) temporarily expanded the child tax credit for many
low- and moderate-income families for 2021. The ARPA changes to the 2021 child tax credit are
discussed in detail in a previous CRS Insight. The ARPA legislative changes to the child tax credit are
layered on top of other temporary legislative changes enacted as part of the 2017 law commonly referred
to as the Tax Cuts and Jobs Act (TCJA; P.L. 115-97). The TCJA changes are in effect until the end of
2025, as summarized below in Table 1.
The Biden Administration has proposed as part of the American Families Plan to “extend the child tax
credit increases in the American Rescue Plan through 2025 and make the child tax credit permanently
fully refundable.” Absent any other legislative changes, this would mean that
from 2022 to 2025, the ARPA expanded child tax credit would be in effect; and
beginning in 2026, the child tax credit would mostly revert to its pre-TCJA parameters, except the
credit would be fully refundable, as highlighted in Table 2 and il ustrated in the figure at the end
of this Insight.
The Biden Administration has indicated that it would like to work with Congress to make al of the ARPA
changes to the child tax credit permanent after 2025 (not just full refundability), a position supported by
some Members of Congress. In addition, Chairman Neal of the Ways and Means Committee recently
released a discussion draft of the Building an Economy for Families Act that would permanently extend
the ARPA changes (as wel as making further modifications). Other Members of Congress have expressed
concern with the ARPA expansion of the child tax credit.
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CRS INSIGHT
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Table 1. Selected Parameters of the Child Tax Credit Under Current Law
Tax Years Beginning in 2018 or Later
Parameter
2018-2020
2021
2022-2025
2026-
Maximum Credit
$2,000 per child 0-16
$3,600 per child 0-5
$2,000 per child 0-16
$1,000 per child 0-16
years old
years old
years old
years old
$3,000 per child 6-17
years old
Maximum Credit for
$1,400 per child 0-16
$3,600 per child 0-5
$1,400 per child 0-16
$1,000 per child 0-16
Low-Income
years old
years old
years old
years old
Taxpayers (the
refundable additional
$3,000 per child 6-17
child tax credit, or
years old
ACTC)
ACTC Formula
15% of earned income
No formula; credit is
15% of earned income 15% of earned income
above $2,500, not to
equal to fixed amount
above $2,500, not to
above $3,000, not to
exceed $1,400 per
per child and is ful y
exceed $1,400 per
exceed $1,000 per
child.
refundable. Taxpayers
child.
child.
with no income tax
liability and no earned
income receive the
maximum amount.
Phaseout Threshold
$400,000 married
First Threshold
$400,000 MFJ
$110,000 MFJ
filing jointly (MFJ)
(Phaseout of Increased
Credit)
$200,000 HOH & S
$75,000 HOH & S
$200,000 head of
$150,000 MFJ
household (HOH) &
$112,500 HOH
single (S)
$75,000 S
Second Threshold
(Phaseout of Prior-
Law Credit)
$400,000 MFJ
$200,000 HOH
& S
Child ID
Social Security
SSN
SSN
SSN or individual
Requirements
Number (SSN)
taxpayer identification
number (ITIN)
Maximum Child Age
16
17
16
16
(at the end of the
year)
Method of Receipt
Claimed on tax return
50% advanced;
Claimed on tax return Claimed on tax return
remainder claimed on
tax return
Temporary
Yes, changes made by
Yes, changes made by
Yes, changes made by
No
Modification in Effect?
the TCJA (P.L. 115-
the TCJA (P.L. 115-
the TCJA (P.L. 115-
97) in effect
97) and ARPA (P.L.
97) in effect
117-2) in effect
Source: CRS analysis of Internal Revenue Code (IRC) §24.
Notes: Tax years refers to the year in which this change is in effect. For most taxpayers, the 2021 tax year is calendar
year 2021, and 2021 tax provisions, including tax credits, are general y claimed on 2021 income tax returns, filed in 2022.
In the case of the child credit, at least 50% of the 2021 credit wil be claimed on 2021 income tax returns.
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Table 2. Selected Parameters of the Child Tax Credit Under President Biden’s Proposed
American Family Plan & Absent Any Other Legislative Changes
Proposed for
After
Parameter
2022-2025
2025
Maximum Credit
$3,600 per child 0-5 years old
$1,000 per child 0-16 years old
$3,000 per child 6-17 years old
Maximum Credit for Low-Income
$3,600 per child 0-5 years old
$1,000 per child 0-16 years old
Taxpayers (the refundable additional
child tax credit, or ACTC)
$3,000 per child 6-17 years old
ACTC Formula
No formula; credit would be equal to
No formula; credit would be equal to
fixed amount per child and would be
fixed amount per child and would be
ful y refundable. Hence, taxpayers
ful y refundable. Hence, taxpayers
with no income tax liability and no
with no income tax liability and no
earned income would receive the
earned income would receive the
maximum amount.
maximum amount.
Phaseout Threshold
First Threshold
$110,000 MFJ
(Phaseout Increased Credit)
$150,000 MFJ
$75,000 HOH & S
$112,500 HOH
$75,000 S
Second Threshold
(Phaseout Prior-Law Credit)
$400,000 MFJ
$200,000 HOH & S
Child ID Requirements
SSN
SSN or ITIN
Maximum Child Age (at the end of
17
16
the year)
Method of Receipt
50% advanced; remainder claimed on
Claimed on tax return
tax return
Source: CRS analysis of the American Family Plan Fact Sheet and IRC §24, assuming no other legislative changes.
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Author Information
Margot L. Crandall-Hollick
Acting Section Research Manager
Disclaimer
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