The Child Tax Credit (CTC) may be about to expand, but not all families will feel the benefit equally. A new bill, sponsored by Republicans in the House of Representatives and recently passed, seeks to significantly boost this tax credit, although its design leaves out millions of the most vulnerable children.
The CTC is a tax incentive available throughout the U.S. that allows families with children under 17 to deduct up to $2,000 per child from their federal taxes, under current law. The goal of this support is to ease the financial burden on middle-class and low-income families.
Two tax credit policies are being debated in the Senate: Here’s what could happen
The initiative has three fundamental pillars:
- Consolidate the Current: Make permanent the current $2,000 child credit, an amount initially established in the 2017 tax reform (during the Trump administration).
- Temporarily Increase: Raise the maximum credit to $2,500 per child under age 17 for a specified period: from 2025 to 2028.
- Future Protection: Starting in 2028, automatically adjust (index) the value of the loan based on inflation, so it doesn’t lose purchasing power over time.
Advocates, led by figures like Representative Jason Smith (Republican from Missouri), argue that this increase is essential. They underscore the enormous financial burden that working families face today, with childcare costs that have soared more than 200% in three decades—even surpassing college tuition in many states—and housing becoming less affordable. Smith calls the CTC “a critical investment in America’s future workforce.”
To access the full credit ($2,500 during the increase period), three basic requirements must be met:
- Age: Children must be under 17 years old.
- Identification: Must have a valid Social Security Number (SSN).
- Income: The credit begins to phase out for taxpayers with adjusted gross incomes (AGI) above $400,000 (married filing jointly) or $200,000 (single or head of household).
We must emphasize emphatically where it says “refundable.” In 2025, $1,700 of the credit would be refundable, meaning families could receive that money even if they don’t owe taxes.
However, here’s the big stumbling block for those with the lowest incomes: this refundable component only increases by 15% for every dollar of income above $2,500. This formula makes it extremely difficult, if not impossible, for households with very low or no income to receive the full $1,700 credit, let alone the increase to $2,500.
Who will not be able to claim the expanded CTC
Herein lies the main criticism of the bill. Policy experts estimate that around 17 million children currently do not receive the full $2,000 benefit due to limitations in the reimbursable component. The new expansion does not address this fundamental problem:
- Families with no taxable income or very low taxable income will not benefit from the proposed increase.
- An estimated 4.5 million children who are U.S. citizens or legal residents could lose all eligibility if their parents do not have an SSN (even if the child does).
The Senate Threatens to Cut Residential Tax Credits
While one tax credit is growing (albeit with limitations), another crucial to the energy transition faces drastic and premature cuts. Tax incentives for residential solar energy, a pillar of the Inflation Relief Act (IRA) of 2022, are in the Senate’s sights, proposing to accelerate their demise at an alarming rate.
These solar tax credits allow homeowners to deduct a significant percentage of the cost of installing solar panels on their homes directly from their federal tax bill. Under current law (IRA), they were scheduled to remain strong and begin phasing out only in 2032. This long-term framework was designed to provide stability and encourage continued investment in clean energy.
However, a recent proposal from the Senate Finance Committee, introduced as part of a broader fiscal package on June 16, 2025, would radically change the rules of the game:
- Accelerated Cut: Solar (and wind) energy credits would be reduced to 60% of their current value by 2026.
- Premature Death: These credits would be completely phased out by 2028, four years earlier than originally planned!
- Direct Hit to Residential: For home solar installations, the blow is even swifter and harsher: the credit would expire 180 days after the bill is passed and signed into law, abruptly truncating the planned deadline until the end of 2025.
What adds controversy is the contrast with the proposed treatment of other renewable energy sources. While solar and wind (considered more “intermittent”) are punished with immediate cuts, credits for hydroelectric, geothermal, and nuclear energy would receive a significant extension until 2036, maintaining 100% of their value until 2033 and gradually reducing only afterward.
This disparity has led to criticism that traditional or more consistent energy sources may favor energy, and American families seeking more eco-friendly, clean-energy homes could be affected.
