You're not alone in feeling uncertain about your financial future right now. The Trump administration is shaking a lot of things up and a high cost of living remains an issue for many Americans.
Right now, Congress is in the process of hammering out the details of a tax bill that will have a significant effect on all our lives over the coming years. While nothing's been finalized yet, House Republicans have put forth their idea in a bill titled "The One, Big, Beautiful Bill," in homage to President Donald Trump.
The 389-page bill covers a variety of tax changes. But one of the most interesting to parents is an extension of the increased child tax credit that was established in 2018. Here's what you need to know.
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Higher child tax credits are here to stay -- sort of
In Trump's first term in office, he passed the Tax Cuts and Jobs Act of 2017. This increased the child tax credit from $1,000 per child to $2,500 per child. Initially, this was only scheduled to last through 2025. Current law has the child tax credit returning to $1,000 per child in 2026.
If this new tax bill passes, it would extend the $2,500 child tax credit through the year 2028. Beginning in 2029, it would drop the credit to $2,000 per qualifying child.
Current law allows $1,400 of the credit to be refundable, meaning that even if your tax liability is zero, filing a return to claim the child tax credit could give you a $1,400 refund per child. This is scheduled to remain in place according to the new bill.
The new bill also calls for inflation adjustments, both for the overall credit and the refundable portion, in future years so its value remains comparable to what it is today. If the inflation adjustment results in a new number that isn't a multiple of $100, the government would round down to the nearest $100.
The Republican-backed bill makes clear that this credit would only be available to those who submitted their Social Security numbers and the Social Security numbers of their child(ren) on their tax return. If you're married, you must include your spouse's Social Security number as well to be eligible.
What this means for families
There's no guarantee that the current bill will pass as is. However, if it does, the extension of the child tax credit would be a help to many families with children.
Unlike tax deductions, which reduce your taxable income, tax credits are a dollar-for-dollar reduction of your tax liability. For example, if you owed $5,000 in federal income taxes in 2025 and you have two qualifying children, your child tax credits would wipe out your tax liability completely so you'd owe nothing.
The fact that a portion of the credit is refundable could also be a big help to lower-income families. It could increase the size of their refund, giving them more money to put toward other expenses.
We'll have to wait and see what kind of progress the bill makes in the coming weeks. It covers a lot of ground and could see significant changes yet. But that doesn't mean the increased child tax credit would get cut. Regardless, it will remain in place for 2025 so you will be able to take advantage of it when you file your tax return next spring.
