A major spending package outlining how the government proposes to use taxpayer money was recently approved by the Senate. The bill includes an expanded child tax credit, which could mean hundreds more dollars in your pocket if you have kids at home.
A tax credit is a dollar-for-dollar reduction in the tax you owe, which lowers the amount you pay or increases your refund.
The House and Senate are still working out the final details, but here’s what parents need to know about the proposed child tax credit changes and how they might affect your family’s bottom line.
What’s changing with the child tax credit?
Right now, you can claim up to $2,000 per child under 17 on your taxes. Without any action from Congress, that amount drops to just $1,000 after 2025. The Senate’s new bill would permanently raise the maximum credit to $2,200 starting in 2025 and tie future increases to inflation.
The House has different ideas, proposing an even bigger boost to $2,500 per child from 2025 through 2028. After that, it would settle back to $2,000 but still adjust for inflation going forward.
Here’s where it gets tricky: the credit starts phasing out once your adjusted gross income hits $200,000 for single filers or $400,000 for married couples filing jointly. So if you’re earning above those thresholds, you won’t see the full benefit.
Who benefits from the higher tax credit?
If you’re a middle-income family with two kids, the Senate’s proposal could mean an extra $400 at tax time compared to what you get now. Not exactly life-changing money, but it could cover a month of groceries or help with back-to-school expenses.
Lower-income families might not see much benefit at all. According to the Center on Budget and Policy Priorities, about 17 million children won’t get the full credit because their families don’t earn enough to owe sufficient taxes.
This is because the Child Tax Credit works in two parts. There is a main credit that reduces what you owe in taxes, and a “refundable” portion you can receive even if you don’t owe taxes. For 2025, the refundable part maxes out at $1,700 per child, and you cannot receive more than this as a tax refund.
Neither the Senate nor House bills change this, which means lower-income families will still get the same refundable amount and won’t see additional money from the higher credit.
When you may see the money
If enacted, the changes will take effect for the 2025 tax year. That means you won’t see any extra cash until you file your 2025 taxes in early 2026.
You could potentially see the benefit sooner by adjusting your tax withholding. If you know you’ll qualify for the higher credit, you could have less money taken out of each paycheck starting in 2025.
Just be careful not to under-withhold too much, or you might owe money come tax time.
Smart moves to make now
These changes to the child tax credit aren’t finalized yet, but you can start taking practical steps now to prepare and make the most of a potentially larger credit in 2026.
- Check where your income stands. Calculate whether your adjusted gross income puts you in the phase-out range and estimate how much credit you would actually receive under the proposed rules.
- Avoid spending any expected refund early. If you anticipate a bigger refund, consider using it to build your emergency fund, for example, with SoFi Checking, pay down high-interest debt, or contribute to a 529 college savings plan.
- Keep your income lower if you are close to the limits. Contributing more to a 401(k) or traditional IRA can help you stay eligible for the full credit and boost retirement savings at the same time.
- Review your other income-based benefits. A higher tax credit refund may affect eligibility for programs such as subsidized health insurance, as the refundable portion can be considered income.
An extra $200 per child may not dramatically change most families’ finances, but it is still meaningful support. Watching how Congress finalizes the details can help you plan wisely and ensure you make the best use of any additional refund in 2026.
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