The next few years is set to be significant for the Child Tax Credit (CTC) with significant expansions and legislative changings happening for qualifying parents in the new year. The CTC is a government program designed to provide financial relief to families with dependent children with the overall aim to reduce poverty and support the cost of raising kids.
The Child Tax Credit expansion is set to expire in 2026
Introduced in the midst of the COVID-19 pandemic, the American Rescue Plan was introduced by the Biden administration to provide immediate relief to millions of Americans. Part of the plan included an expansion of the CTC, whereby the policy was expanded to include credit for children aged seventeen instead of the cutoff being at sixteen years old. The expansion however is set to conclude in 2026 unless Congress votes to extend it.
The likelihood of the expansion being continued is uncertain, however it is clear that the effects were substantial. Since 2021 when the expansion was granted, a study by Columbia University’s Center on Poverty and Social Policy has found that the payments reached nearly 61 million children and reduced monthly rates of child poverty.
Other significant advances which have been made to the CTC since the expansion include other states introducing additional CTC for their residents. While the CTC is a federal program, states have recognized the need to support low-income and vulnerable families with children and have subsequently created their own CTC programs in addition to the federal program.
States introduce their own CTC
How the federal CTC program works is that qualifying families can receive $2,000 per child in tax rebates, with $1,600 being refundable and the remining $400 being refundable. What this means is that you can receive back $1,600 in tax rebates even if you do not owe that much in taxes. The remaining $400 can only be used to lower your taxes.
The $2,000 was set during the COVID-19 pandemic, where it previously was set at $1,000 for children under the age of sixteen years old. Unless Congress continues to extend the expansion, the CTC will revert back to this original amount and exclude children of seventeen years old. This potential change could significantly impact families with older children, particularly those who rely on the expanded credit to meet their financial needs.
Following the success of the CTC expansion, 16 states have decided to implement their own CTC programs. While the CTC may revert back to its original criteria, parents in the following states can be comforted to know that they can still receive payments at a state level provided they meet the qualifying criteria:
- Arizona
- California
- Colorado
- Idaho
- Illinois
- Maine
- Maryland
- Massachusetts
- Minnesota
- New Jersey
- New Mexico
- New York
- Oklahoma
- Oregon
- Utah
- Vermont
Which states are offering the highest amount of credit?
Each states CTC program differs in eligibility and payment amounts for each child. Colorado sits at the higher end of the spectrum, offering up to $3,200 per child depending on your household income statues. Minnesota is offering a high rebate, with $1,750 per child for individual filers making $29,500 or less, or $35,000 for joint filers. Other states offering over $1,000 per child include Oregon, Utah, and Vermont.
Minnesota governor Tim Walz recently announced that taxpayers can receive an advanced payment on their CTC. If a resident qualifies for the state CTC and opts for this option, they will receive both their 2025 and 2026 CTC payment next year. The advance will be paid in increments in the latter half of 2025.
“The goal of this nation-leading tax credit is to lower child poverty and provide tax relief for working-class families in Minnesota,” Walz said. “With the advance payment option, we’re making it easier for families to manage their annual household budget. This new option will increase financial freedom and ensure families have the support they need all year long.”
