HR1425-119

What This Bill Does

This bill dramatically expands the Child Tax Credit by increasing the credit amount from $1,000 to $5,000 per child, making it fully refundable so all families can benefit regardless of income, and removing income phase-out limitations that previously reduced or eliminated the credit for higher-income families. The changes would apply retroactively to taxable years beginning after December 31, 2024.

Who Benefits and How

Families with dependent children are the primary beneficiaries, receiving up to $5,000 per qualifying child rather than the current $1,000. Low-income families benefit most significantly because the credit becomes fully refundable, meaning they can receive the full credit amount even if they owe little or no federal income tax. Middle and upper-income families also benefit from the removal of income phase-outs that previously reduced their credits.

Who Bears the Burden and How

Federal taxpayers collectively bear the cost through reduced federal revenue, as the Treasury Department will collect significantly less in income taxes. The Congressional Budget Office would need to score this bill, but expanding the credit fivefold while removing income limitations and making it fully refundable represents a substantial increase in federal spending through the tax code.

Key Provisions

• Increases the Child Tax Credit from $1,000 to $5,000 per qualifying child
• Eliminates income limitations that phase out the credit for higher earners (strikes subsection (b))
• Makes the credit fully refundable so families can receive the benefit even with zero tax liability
• Removes the advance payment mechanism (strikes section 7527A)
• Applies retroactively to tax years beginning after December 31, 2024
• Maintains coverage for bona fide residents of American Samoa under special rules