tax policy center
Tax Topics

Tax Topics

2009 Tax Stimulus
2012 Election Tax Plans
2014 Budget
Alternative Minimum Tax (AMT)
American Jobs Act of 2011
Brief Description of the Model 2013
Current-Law Distribution of Taxes
Deficit Reduction Proposals
Distribution of the 2001 - 2008 Tax Cuts
Earned Income Tax Credit
Economic Stimulus
Education Tax Incentives
Estate and Gift Taxes
Expiration of the Bush Tax Cuts
Explanation of Income Measures 2013
Federal Budget
Fiscal Cliff
Fiscal Crisis
Flow-Through-Enterprises
Guide to TPC Tables
Health Insurance Tax Incentives
Homeownership
How to Interpret Distribution Tables 2013
Marriage Penalties
Model FAQ 2013
Model Related Resources and FAQs
Payroll Taxes
Presidential Transition - 2009
Recent Tax Stimulus Legislation
Retirement Saving
Tax Encyclopedia Index
Tax Expenditures
Tax Reform Proposals
Value-Added Tax (VAT)
Who Doesn't Pay Federal Taxes?
Working Families

E-mail Newsletter

Enter your e-mail address to receive periodic updates on TPC publications and events.

> newsletter archive

tax topics
 

Budget Header 2011

  Return to Previous Budget Provision                                  Go to Next Budget Provision    
  

Permanently Expand Refundability of the Child Tax Credit

Families with children under age 17 can claim a Child Tax Credit (CTC) of up to $1,000 per child. If the credit exceeds taxes owed, families can receive some or all of the balance as a refund, known as the Additional Child Tax Credit (ACTC). The ACTC is limited to 15 percent of earnings above a threshold that is indexed to inflation. The economic stimulus act (“American Recovery and Reinvestment Act of 2009”) temporarily set that threshold at $3,000 so that families would start getting at least a partial credit at lower earnings levels than they did under prior law ($12,550 in 2009). The president proposes to make the lower threshold permanent. Lowering the threshold for refundability would encourage low-income workers to work more by increasing their after-tax wage but the effect would likely be small.

The president made a similar proposal in his 2010 budget, where he also proposed to discontinue indexing the threshold for inflation. Budget materials released to date do not address the issue. Not indexing the threshold would cause the threshold to decrease in real terms over time, making more families eligible for the refundable credit and increasing the size of the credit for many families.

Footnote
The president would include the increased refundability of the child tax credit in his budget baseline.

Additional Resources
Tax Policy Briefing Book: Taxation and the Family: What is the child tax credit?
Stimulus Act Report Card: Increase Eligibility for the Refundable Portion of the Child Tax Credit