Almost all families with children benefit from the Child Tax Credit (CTC). But in 2025, the Tax Policy Center estimates that 17 million children under the age of 17—or one in four—will receive less than the full value of the credit because their parents earn too little. Most of these children (15 million) live in families that earn at least $2,500—the required minimum for any CTC beyond taxes owed.
Congress has options when it debates the future of the CTC along with many expiring provisions of 2017’s Tax Cuts and Jobs Act (TCJA). It could reduce the number of low-income children left out of the full credit. Evidence shows this could reduce poverty and food insecurity, improving health and well-being outcomes for children.
In 2025, most children (70 percent) will live in families that receive the full value of the CTC, $2,000 per child under age 17. But the current design of the CTC limits who can receive the full benefit.
Families that do not owe federal income taxes and earn less than $2,500 receive no CTC. That’s about 2 million children under age 17 (about 3 percent). Another 15 million children (about 22 percent) live in families with at least $2,500 of earnings—the combination of earnings and income taxes owed by their families is not enough to be able to claim the full credit. A disproportionate share of these children are Black and Hispanic.
Only about 5 percent of children live in families that receive less than the full credit because their incomes are high enough that the credit value begins to decrease.
The credit works by first offsetting taxes owed. If a family owes at least $2,000 per child in federal income taxes, the credit simply reduces their tax bill. But families with low incomes (which often bounce around from year-to-year) usually owe less than that. These families can receive a share of the CTC as a tax refund. The CTC gives them 15 cents for every dollar they earn beyond $2,500, up to a maximum of up to $1,700 per child.
For example: A single parent working full-time at the federal minimum wage earns about $15,000. In most cases, that will be less than their standard deduction—the amount of income a person can have before owing taxes. This means the parent likely owes little to no federal income tax. If this parent has one child, their CTC would amount to 15 percent of their earnings beyond $2,500—or about $1,875. Since this exceeds the maximum CTC a parent with one child can receive in excess of taxes owed, the credit falls to the maximum $1,700 for this family. If there’s more than one child in the household, the family’s credit would be limited to $1,875.
In 2021, Congress temporarily changed the rules of the CTC and families with low incomes received the full credit without regard to earnings or taxes owed. In that year, poverty was cut in half and food insecurity declined, both of which have been related in research studies to better health outcomes for children and improved educational and economic attainment.
As Congress begins to think through changes to the CTC in the upcoming TCJA debate, a variety of options can increase the CTC for very low-income families while minimizing fiscal cost. Adopting any one of these options could produce long-term dividends for children and society.
