Child Tax Credit 2025

What is it?

The Child Tax Credit(CTC) is a part of the “Big Beautiful Spending” bill proposed by president Trump. The current CTC is set at up to $2000 with a refundable portion of $1700 after the tax credit exceeds the taxes owed. It is clear though that change is on the horizon as two separate bills are being proposed in both the House and the Senate, the one the House states an increase to $2200 permanently, while the one in the Senate bill states an increase to $2500 until 2028, both being indexed for inflation in the years following with neither changing the formula for how the credit and refund are calculated and neither changing the refund amount. While it is unclear as to which will be signed into law it is clear that changes are coming and that you should be prepared for these changes.

How does this affect you?

For the 2025 tax year, a tax credit of up to $2000 is allowed for each child 17 or under with a valid social security number that is claimed as a dependent on the taxpayer’s filing. This is based on 15% of your adjusted gross income (AGI) after the first $2500 of earnings in the tax year up to the $2000 in credit with the $1700 being a refund for once the credit exceeds taxes owed. This would mean for anyone making $15080 a year (minimum wage at 40 hours per week for 52 weeks), this would mean that for $12580, 15% of this up to the $1700 would be refunded per child eligible. If one of the bills from the Senate or the House were to be passed into law this would change and allow for a more tax credit to be applied at the end of the tax year, reducing the taxpayer’s liability for taxes owed in the 2025 tax year. This would lower how much you pay in taxes, leaving more income free.

Why is this important?

A new bill should one be passed regardless of which bill it is, the House or Senate bill, would leave more free income for families with claimable dependents, which would incentivize the birth of new children. While America continues to see a lower birth rate year over year, seeing an all time low in 2023 with 54.5 births per 1000 women according to the CDC. A higher tax credit per child would allow for more money to alleviate the pressure from lower and middle income families. 

How can we help you?

Reach out via our phone number, email or website to book a consultation to see how we can help you to understand better how this will affect you and to help you understand your taxes and get them filed properly and securely.