Child Tax Credit Expansion: Status of the Proposed Congressional Bill

For millions of American parents, the promise of a larger refund check has been in limbo for most of 2024. You may have heard about a bipartisan effort in Congress to expand the Child Tax Credit (CTC) with retroactive benefits. However, despite early success in the House of Representatives, the legislation encountered a major roadblock in the Senate. Here is the current reality regarding the Tax Relief for American Families and Workers Act and what it means for your family finances.

The Senate Vote: A Major Setback

The specific piece of legislation in question is the Tax Relief for American Families and Workers Act of 2024 (H.R. 7024). This bill was designed to expand the Child Tax Credit, specifically for lower-income families, and restore certain business tax breaks.

While the House of Representatives passed the bill with a massive bipartisan majority (357-70) in January 2024, it stalled almost immediately upon reaching the Senate. The definitive moment came on August 1, 2024. The Senate held a procedural vote to end debate and move the bill forward. The motion required 60 votes to pass but failed with a vote of 48-44.

Senate Republicans, led by Finance Committee Ranking Member Mike Crapo (R-ID), largely opposed the bill. Their objections centered on the “lookback provision” (discussed below) and a preference to negotiate a broader tax package in 2025 when the 2017 Tax Cuts and Jobs Act provisions are set to expire.

What Was in the Proposal?

To understand what families are missing out on, it helps to look at the specific numbers proposed in the bill crafted by Senator Ron Wyden (D-OR) and Representative Jason Smith (R-MO).

Current law provides a maximum credit of $2,000 per child. However, if you owe little to no income tax, you cannot receive the full amount. You are limited to the “refundable” portion, known as the Additional Child Tax Credit (ACTC). Under current 2024 law, this refund is capped at $1,700.

The failed Senate bill proposed three specific changes:

1. Inflation Adjustment: The overall $2,000 cap would have finally increased based on inflation.
2. Refundable Cap Increase: The refundable limit would have jumped to $1,800 for 2023, $1,900 for 2024, and the full $2,000 for 2025.
3. Per-Child Phase-In: Currently, families with multiple children phase into the credit at the same rate as families with one child. The bill would have allowed families to reach the maximum credit faster based on the number of children they have.

The "Lookback" Provision and Retroactive Checks

The snippet provided mentions “retroactive tax breaks.” This refers to a unique feature of the bill known as the “lookback provision.”

This rule would have allowed parents to use their income from the previous tax year to calculate their credit if that income was higher than the current year. For example, if a parent earned $25,000 in 2023 but lost their job and earned only $15,000 in 2024, they could have used the 2023 income to qualify for a larger tax refund.

Because the bill was originally intended to pass in early 2024, it included language to make these changes retroactive to the 2023 tax year. The IRS was prepared to automatically send checks to qualifying families for the difference between what they received and what they were owed under the new law.

Status Update: Since the bill failed the August 1 procedural vote, retroactive payments for the 2023 tax year are highly unlikely. The window for implementing a retroactive change for returns already filed and processed has effectively closed.

Looking Ahead: The 2025 Tax Cliff

While the expansion is stalled for now, the conversation is not over. The entire US tax code is heading toward a “fiscal cliff” at the end of 2025.

Key provisions of the 2017 Tax Cuts and Jobs Act (signed by Donald Trump) will expire on December 31, 2025. This includes lower individual income tax rates and the increased standard deduction. Because Congress must address these expiring laws to prevent a massive tax hike on nearly all Americans, the Child Tax Credit will be a central part of those negotiations.

Many lawmakers who voted against the bill in August 2024 indicated they wanted to wait for this larger negotiation period to redesign the CTC completely. This means families likely will not see a federal expansion before the 2024 election, and any changes passed in 2025 would likely apply to future tax years rather than retroactive ones.

State-Level Alternatives

With federal legislation blocked, many families should look to their state governments for relief. Several states have enacted or expanded their own Child Tax Credits in 2024 to fill the gap.

• Minnesota: Recently enacted a credit of up to $1,750 per child, which is fully refundable.
• Colorado: Offers a credit ranging from 10% to 60% of the federal credit depending on income.
• New York: Recently expanded its Empire State Child Credit to include children under age four, who were previously excluded.
• Massachusetts: Increased its Child and Family Tax Credit to $440 per dependent for 2024.

You should check with a local tax professional or the Department of Revenue website in your specific state to see if you qualify for these regional benefits.

Frequently Asked Questions

Is the Child Tax Credit going up for 2024 tax returns? Under current law, the maximum credit remains $2,000 per child. However, the refundable portion (the amount you get if you owe zero tax) has increased slightly due to inflation adjustments already in the law, rising from $1,600 to $1,700 for the 2024 tax year.

Will I get a retroactive check for 2023? It is extremely unlikely. Because the Senate blocked the bill on August 1, 2024, the mechanism to send retroactive checks for the 2023 tax year has not been signed into law.

Why did the Senate block the bill? The vote was largely along party lines. Republican opponents argued that the “lookback provision” weakened work requirements by allowing people to receive credits based on past income even if they were not currently working. They also expressed a desire to negotiate a more comprehensive tax package in 2025.

What are the income limits for the current Child Tax Credit? The full $2,000 credit begins to phase out (decrease) once your Modified Adjusted Gross Income (MAGI) exceeds $200,000 for single filers or $400,000 for married couples filing jointly.