Part 1: Tax Relief for Working Families
Calculation of Refundable Credit on a Per-Child Basis. —Under current law, the maximum refundable child tax credit for a taxpayer is computed by multiplying that taxpayer’s earned income (in excess of $2,500) by 15 percent. This provision modifies the calculation of the maximum refundable credit amount by providing that taxpayers first multiply their earned income (in excess of $2,500) by 15 percent, and then multiply that amount by the number of qualifying children. This policy would be effective for tax years 2023, 2024, and 2025. Modification in Overall Limit on Refundable Child Tax Credit. —Under current law, the maximum refundable child tax credit is limited to $1,600 per child for 2023, even if the earned income limitation described above is in excess of this amount. This provision increases the maximum refundable amount per child to $1,800 in tax year 2023, $1,900 in tax year 2024, and $2,000 in tax year 2025, along with the inflation adjustment described below.
Adjustment of Child Tax Credit for Inflation. —This provision would adjust the $2,000 value of the child tax credit for inflation in tax years 2024 and 2025, rounded down to the nearest $100. Rule for Determination of Earned Income. —For tax years 2024 and 2025, taxpayers may, at their election, use their earned income from the prior taxable year in calculating their maximum child tax credit if the taxpayer’s earned income in the current taxable year was less than the taxpayer’s earned income in the prior taxable year.
