The Child Tax Credit Under the House Ways and Means Committee “Build Back Better” Reconciliation Language: Calculating the Monthly Credit Amount
INSIGHTi
The Child Tax Credit Under the House Ways
and Means Committee “Build Back Better”
Reconciliation Language: Calculating the
Monthly Credit Amount
September 23, 2021
In September 2021, the House Ways and Means Committee approved reconciliation language that would,
among other changes, effectively extend the expanded child credit in effect in 2021 through the end of
2025. If these changes were to go into effect, eligible taxpayers would receive a monthly per-child benefit
of up to $300 for young children and up to $250 for older children through the end of 2025.
For 2022, the proposal extends the credit in effect in 2021, with some modifications that
would affect its administration in certain cases.
For 2023-2025, the proposal modifies eligibility rules and administration of the credit.
These changes are broadly intended to allow the credit to be more “portable” if children
move between taxpayers during the year, and limit repayment obligations in certain
cases.
After 2025, under current law, the credit is scheduled to return to its prior-law parameters.
However, the Ways and Means language would modify current law such that the credit
would permanently be fully refundable.
Major changes to the child tax credit made by the Ways and Means reconciliation language are
summarized here. This Insight provides a basic overview of how that monthly payment amount would be
calculated.
Calculating the Credit Amount
The proposal would suspend the existing child tax credit under Internal Revenue Code (IRC) Section 24
from 2023 to 2025, and would establish in its place a temporary monthly refundable child credit under a
new IRC Section 24A. The credit amount for a given year would equal the sum of the monthly credit
allowances. Specifically, a taxpayer’s total benefit in a given year would be based on:
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the number of months they have an eligible child (referred to as a “specified child”) and
the number of specified children they have per month,
their filing status in the given year, and
their lowest income in the given year or the two preceding years (which determines if and
to what extent they are subject to the phaseout).
Specified Child
Broadly, a taxpayer could claim a child as a specified child for a given month if the child was under 18
years old, the child lived with the taxpayer for more than half the month, and the child received
uncompensated care from the taxpayer.
Maximum Monthly Credit Allowance Amount
First, a taxpayer would calculate their maximum monthly benefit by adding up the maximum credit
allowances for each of their specified children in that month. If subject to the phaseout, this maximum
monthly benefit amount would be reduced accordingly.
The maximum amount of a credit allowance per month would equal
$300 per “specified” child 0-5 years old, and
$250 per “specified” child 6-17 years old.
For example, if a taxpayer had two young children that were their specified children for a given month,
they would be eligible for up to $600 in the monthly credit allowance for that month.
Phaseout of the Monthly Credit Allowance Amount (If Applicable)
If a taxpayer’s annual income was below an initial phaseout threshold, their benefit amount would not be
subject to phaseout. It a taxpayer’s annual income was above the initial threshold but below a secondary
threshold, the total monthly benefit amount would be phased down in a manner comparable to the current
phaseout of the 2021 credit. If a taxpayer had annual income above the second phaseout, the total monthly
benefit amount would be subject to the initial phaseout as well as a second phaseout. The initial and
secondary thresholds are provided in Table 1.
Table 1. Phaseout Thresholds for the Monthly Child Credit 2023-2025
As Proposed in the Ways and Means Reconciliation Language
Initial Threshold
Secondary Threshold
Filing Status
(Annual Income)
(Annual Income)
Married Filing Jointly/Surviving Spouse
$150,000
$400,000
Head of Household
$112,500
$300,000
Single
$112,500
$200,000
Married Filing Separately
$75,000
$200,000
Source: CRS analysis of the Ways and Means Reconciliation Language.
Note: These amounts would be indexed for inflation.
When determining annual income for purposes of the initial and secondary phaseouts, taxpayers would
select their lowest income from the current year and the preceding two years (e.g., for 2023 monthly
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payments, taxpayers could choose the lowest income from their 2023, 2022, or 2021 income tax return).
This is often referred to as a “lookback.”
Steps to Phase Out the Monthly Amount
If a taxpayer’s annual income (including lookbacks) was greater than the initial threshold, the maximum
amount per month would be subject to the initial phaseout. The amount by which the monthly benefit
would be phased down after the initial phaseout would be limited, such that taxpayers with income
between the initial and secondary thresholds would be eligible for a credit of at least $167 per child per
month (or $2,000 per child per year, as under current law in 2021).
If annual income (including lookbacks) was greater than the secondary threshold, the maximum amount
per month would be subject to the initial phaseout (and the limitation, if applicable), followed by a further
reduction under the second phaseout.
Stylized Examples of Calculating the Monthly Benefit Amount
Below are four stylized examples illustrating how credit amounts would be calculated in different
hypothetical situations in 2023 based on the reconciliation language.
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Author Information
Margot L. Crandall-Hollick
Specialist in Public Finance
Congressional Research Service
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Disclaimer
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Congress. Information in a CRS Report should not be relied upon for purposes other than public understanding of
information that has been provided by CRS to Members of Congress in connection with CRS’s institutional role.
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