Child tax credit (United States)

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The United States federal child tax credit (CTC) is a partially-refundable^[a] tax credit for parents with dependent children. It provides $2,000 in tax relief per qualifying child, with up to $1,600 of that refundable (subject to a refundability threshold, phase-in and phase-out^[b]). In 2021, following the passage of the American Rescue Plan Act of 2021, it was temporarily raised to $3,600 per child under the age of 6 and $3,000 per child between the ages of 6 and 17; it was also made fully-refundable^[c] and half was paid out as monthly benefits. The CTC is scheduled to revert to a $1,000 credit after 2025.

The CTC was estimated to have lifted about 3 million children out of poverty in 2016.^[2] A Columbia University study estimated that the expansion of the CTC in the 2021 American Rescue Plan Act reduced child poverty by an additional 26%, and would have decreased child poverty by an additional 40% had all eligible households claimed the credit.^[3] The expansion also substantially reduced food insufficiency.^[4][5][6] Research indicates that cash transfers to families, like the refundable portion of the CTC, lead to improved math and reading test scores, a higher likelihood of high school graduation, higher college attendance, and long-term increases in income for both parents and children.^[7][8] Studies have also determined that the CTC increases labor force participation among low-income parents.^[9][10]

The CTC was created in 1997 as part of the Taxpayer Relief Act of 1997. Initially a small $500 per child nonrefundable credit, it was progressively made larger and extended to more taxpayers through subsequent legislation. In particular, it was temporarily raised to $1,000 per child and made refundable, subject to a phase-in, by the Jobs and Growth Tax Relief Reconciliation Act of 2003; that raise was made permanent by the American Taxpayer Relief Act of 2012; the credit was temporarily raised to $2,000 per child, with up to $1,400 of that refundable, and the number of taxpayers eligible substantially expanded by the Tax Cuts and Jobs Act of 2017; and finally the credit was expanded substantially and made fully available to very low-income people for one year by the American Rescue Plan Act of 2021.

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