On May 22, 2025, the One Big Beautiful Bill Act (H.R. 1) passed out of the U.S. House of Representatives. This legislation contains sweeping changes that will affect the day to day lives of Americans. The Child Tax Credit (CTC) is one of the many policies within the One Big Beautiful Bill Act that would receive significant alterations, shifting the economic landscape of families across the country. Currently, about 17 million children under the age of 17 (1 in 4) will receive less than the full amount of tax credit this year. As changes to the CTC linger in Congress, how might the proposed legislation affect families?
Currently, about 17 million children under the age of 17 (1 in 4) will receive less than the full amount of tax credit this year.
Child Tax Credit: A primer
The CTC was created in 1997 by the Taxpayer Relief Act of 1997 to assist families struggling with the financial costs of raising children. Initially, the CTC was nonrefundable, which can only reduce tax liability to zero, but does not help families with no tax liability receive a refund. Under current law, the CTC helps taxpayers reduce liability for federal income tax by up to $2,000 per qualifying child. The credit phases lower once the income of a family surpasses $200,000 for single parent/guardian and $400,000 for married couples.
The requirements for dependents to qualify include being under 17 at the end of the tax year, be claimed as a dependent on caregiver tax returns, and be a U.S. citizen, national, or resident alien. CTC phases in at 15 cents for every dollar, irrespective of the number of children in a family.
The CTC has a refundable portion, called the additional child tax credit (ACTC), which is equivalent to: Fifteen percent of the refundability rate of earnings that are over $2,500, which continues to the maximum amount of the refundable part of the credit: $1,700 per child in 2025.
How does the One Big Beautiful Bill Act change the Child Tax Credit?
If current language is passed into law, the One Big Beautiful Bill Act will increase the full tax credit amount to $2,500 per child through 2028, require the filer and spouse to have a Social Security Number (SSN) to qualify, and set the full credit value to $2,000 for successive tax years after 2028. This increase would provide almost $22.9 billion of CTC benefits to families with children in 2026, however this would largely benefit middle-income and high-income households. Low income recipients are families in the lowest income quintile with an average benefit amongst all families of less than $500 per child under 17, and an average benefit of $1,500 for families with children.
How are low income families impacted?
The Tax Policy Center reports that a $2,500 tax credit per child would help low-income recipients at an average increase of $350, while middle- and higher-income families receive a credit up to $800. These figures show that low- income recipients receive half the amount that individuals with higher incomes receive, despite having a lower socioeconomic status to sustain their wellbeing. There are ways that the credit could be redesigned to better reach the families with the lowest incomes, including making it a fully refundable credit.
Families with children that have annual earnings equivalent to $2,500 or less are ineligible for the CTC.
Families with children that have annual earnings equivalent to $2,500 or less are ineligible for the CTC. The CTC phases in for families earning above $2,500 at $15 for each $100 of a family’s wages above the $2,500 threshold until a family is eligible for the full $2,000 for each child. The phase-in for the CTC occurs on a per-family basis. Even if the CTC was increased to $2,500, many families would still be excluded due to the financial thresholds needed to meet eligibility. Under the future proposed changes to the CTC by the One Big Beautiful Bill Act, the top 20 percent of families with children would get almost 10 times CTC benefits than they’re currently receiving, while 20 percent of the lowest income families would receive just 2 percent of CTC benefits.
How would the current tax credit impact Ohioans?
As the tax credit framework currently stands, 643,000 Ohio children will be left out of the full $2,000 tax credit this year. Broken down by ethnicity, these are the estimates of the number of children that will not receive the full tax credit:
Child Tax Credit moving forward
As the U.S. Senate debates the One Big Beautiful Bill Act, policymakers will meet to make crucial decisions on the bill and its ultimate fate, setting the tone for the domestic policy landscape of America. Community Solutions will continue to track legislative changes in the bill as it moves through the Senate, covering other topics of relevance.
