Child Tax Credit: Future Value & Potential Changes - Expert Analysis

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The boosted Child Tax Credit won't last forever. Here's what families need to know.

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Key points

• Right now, the Child Tax Credit is worth up to $3,600 for children under age 6 and up to $3,000 for those aged 6 to 17.
• Once a few key provisions expire, the credit's value could drop substantially.

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Many families have grown reliant on the boosted Child Tax Credit to cover their expenses. And the tax credit has already done an outstanding job of lifting millions of children out of poverty.

But the enhancement to the credit that's currently in place won't stick around forever. In fact, in five years, the credit could end up being worth a lot less money than it's worth today.

A big financial blow to families

Currently, the Child Tax Credit is worth up to $3,600 for children under the age of 6, and up to $3,000 for children aged 6 to 17. But come 2026, the value of the credit could max out at just $1,000.

How is that possible? Prior to 2021, the Child Tax Credit had a maximum value of $2,000 per child, and only a portion of that was refundable, meaning people with no tax liability couldn’t claim its full value. The American Rescue Plan, which was signed into law in March and sent a third round of stimulus checks into Americans' bank accounts, boosted the credit for 2021 only. It also made the credit fully refundable and allowed for half of it to be paid in the form of monthly installments.

Lawmakers intend to keep the current version of the Child Tax Credit in place for 2022. But in 2023, its maximum value will drop down to $2,000.

Now, let's go back in time a bit, to the Tax Cuts and Jobs Act of 2017. During that sweeping tax code overhaul, the Child Tax Credit's value was increased from $1,000 to $2,000 through 2025. If lawmakers don't extend that provision, then in 2026, the credit will revert to its former value and max out at $1,000 per child.

One silver lining with the Child Tax Credit situation

Clearly, seeing the value of the Child Tax Credit shrink from a maximum of $3,600 to $1,000 will constitute a major financial blow for families who are reliant on that money to stay afloat. But unless lawmakers intervene, the credit will eventually be worth a lot less money.

One positive thing is that lawmakers are working to make the full refundability of the credit permanent, allowing people with no tax liability to claim its full value. As mentioned, this is the first year in which the entire credit has been refundable. Going forward, full refundability could put a lot more money into the hands of people who are eligible for the credit but also have no tax liability. In fact, experts say that even if the Child Tax Credit's value falls, the full refundability aspect will still help reduce the number of children living in poverty.

Lawmakers initially wanted to keep the current version of the Child Tax Credit in place through 2025, but they had to backtrack due to the high cost of maintaining the enhancement for that long.

Meanwhile, those collecting the Child Tax Credit have one more monthly installment payment to look forward to this year. Families receiving those installments can then expect to get the rest of their 2021 Child Tax Credit when they file their taxes in 2022.

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