Goodbye to the Child Tax Credit? Millions of families could lose it under Trump’s ‘one big, beautiful bill,’ experts say
Republicans are working to pass President Trump’s signature tax bill that could strip eligibility to claim the child tax credit from millions of households.
President Donald Trump’s signature tax and immigration bill is in the hands of senators on Capitol Hill. The legislation narrowly passed the House of Representatives in May and Republicans want to get the bill to Trump by the 4th of July.
However, some are objecting to the fact that what is being called the ‘one big, beautiful bill’ could explode the national debt. According to the nonpartisan Congressional Budget Office it could be as much as $2.4 trillion.
The legislation, if enacted, will make some of Trump’s previous tax cuts permanent and provide new or bigger tax breaks. For example, the Child Tax Credit, which was doubled in 2017 to $2,000, will get an additional boost to $2,500 per child. However, at the same time millions of households would no longer be able to claim the credit.
Millions of American households could lose Child Tax Credit
The revamp of the Child Tax Credit that passed the House of Representatives requires that both parents have Social Security numbers. That means children, who are US citizens, of mixed-status households, where one parent is a US citizen and the other is not, would no longer be eligible for the tax credit.
This change would affect roughly 4.5 million children according to an estimate by researchers at the Center for Migration Studies, Center on Poverty and Social Policy, and the Institute on Taxation and Economic Policy (ITEP). California would be the most impacted state followed by Texas, Florida, New York and Illinois.
This new requirement that both spouses have a Social Security number in order for a household to claim the Child Tax Credit would apply to a number of other tax credits as well explained Carl Davis, the research director at ITEP to CBS News.
What is the current Child Tax Credit?
The current Child Tax Credit allows taxpayers with eligible children to claim up to $2,000 per child in 2024. Without any action that will revert to $1,000 this year.
The Child Tax Credit is available to taxpayers with dependents under 17 at the end of the tax year in which the credit is claimed and who meet certain eligibility requirements.
The credit is partially refundable, and there is an earnings threshold to start claiming the ‘refundable’ portion known as the ‘Additional Child Tax Credit’.
Taxpayers who owe less in taxes than the refundable amount will have it added to their tax refund, and the non-refundable portion will reduce taxes owed dollar-for-dollar. To claim a refund, filers must complete Schedule 8812.
Currently, parents of eligible children must have an adjusted gross income (AGI) of less than $200,000 for single filers and $400,000 for married filing jointly to claim the full credit. For every $1,000, or fraction thereof, over those thresholds, the credit is reduced by $50.
For lower-income Americans, they must have an income of at least $2,500 to be eligible for the refundable portion of the credit. The amount that can be claimed is a portion of earnings above that threshold.
To calculate how much can be claimed, you need to subtract $2,500 from your “earned income”, for example, Social Security benefits and unemployment compensation do not count, and then multiply that number by 15 percent.
Child Tax Credit eligibility requirements for children
Besides the under 17 age requirement, the child must be eligible to be claimed as a dependent on the taxpayer’s return and live at the same residence as the taxpayer for more than half the year. The child cannot provide more than half of their own financial support during the tax year.
The child must have a valid taxpayer identification number in the form of a work-authorized Social Security number (SSN).
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