The Child Tax Credit — An Explainer

Updated July 30, 2025

What is the Child Tax Credit?

The Child Tax Credit (CTC) is one of the most effective tools to help families manage the rising cost of raising children. The program provides financial relief to American taxpayers with dependent children and has lifted millions of children out of poverty. The current program provides $2,000 per qualifying child under age 17 and phases out for parents earning more than $200,000 ($400,000 for joint filers).

Congress expanded the program in 2021 to provide up to $3,600 per year for each child under age 6 and $3,000 for each child aged 6 to 17. The expansion allowed many taxpayers to receive some of the credit as advance monthly payments and also eliminated minimum income requirements. This critical change allowed families with the lowest incomes to receive the full benefit for the first time. Despite studies showing that the expanded Child Tax Credit cut child poverty nearly in half, Congress let the expansion expire in 2022.

As part of the 2025 Republican megabill, Congress recently increased the maximum credit by $200 and indexed the maximum amount for inflation beginning in tax year 2026, but also blocked millions of American children from being eligible for the full value of the credit. Minimum income requirements mean that 17 million American children can’t receive the full credit because their parents’ income is too low. And an estimated 2.7 million children who are US citizens or lawful permanent residents will be made ineligible due to new rules requiring both parents to have social security numbers.

Why is the Child Tax Credit important?

Lowers the cost of living for working families. Reaching more than 36 million households, including many essential workers with low income, Child Tax Credits are primarily used for immediate needs like food, utilities, housing, clothing, and education expenses. The tax benefits also support local economies. Every dollar of a Child Tax Credit generates $1.50 to $2 in local spending.
Dramatically reduces child poverty. Nearly 3 million children were lifted out of poverty in just one year of the Biden-era expansion, resulting in a child poverty rate that fell by 46% to a record low. Rolling back the improvements made the credit eight times less effective at reducing child poverty. In the year following the expansion rollback, almost 4 million children were estimated to have fallen back into poverty. The impact of child poverty, including poor outcomes in health, education, and economic mobility, cost the nation between $800 billion and $1.1 trillion each year.
Improves rural and racial equity. Before the Biden-era expansion, 27 million children in families with the lowest income – including half of all rural, Black, and Hispanic children received less or no help from the Child Tax Credit. Roughly one in three rural kids were unable to receive the full credit because their families didn’t earn enough to qualify. By eliminating the minimum income requirement, the Biden-era expansion ensured that almost all children received the full benefit amount for the first time.
Builds long-term opportunity. Researchers estimated that restoring the Biden-era Child Tax Credit and making it permanent would cost about $100 billion per year, while generating $1 trillion worth of societal benefits resulting from improvements in education, earnings, health and reduced costs related to child protection and criminal justice. That’s a 1,000% return on investment.
Ensures kids and families don’t fall through the cracks. Children have no control over their parents’ income, and people without reproductive rights are denied control over their economic futures. As abortion bans take effect across the country, notably in states that spend the least on families and kids, more babies will be born to people already experiencing financial hardships. Additional supports are urgently needed in states limiting reproductive freedom.

How are Mainers impacted?

142,000 Maine families with 229,000 children received the expanded Child Tax Credit in 2021. Almost all families with minor children were eligible for the Biden-era credit, including an estimated 49,000 children under 17 who currently receive less than the full credit or no credit at all because their families’ incomes are too low.
When federal and state supplemental assistance like the Child Tax Credit were factored in for the three-year period between 2019 and 2021, Maine ranked among the eight states with the lowest child poverty rates in the nation. In 2021, the expanded CTC led to an estimated 40% reduction in Maine’s child poverty rate.
88% of Maine families with low income use their Child Tax Credit for basic needs like food, utilities, housing, clothing, and education expenses. Following the expansion rollback, six times more families reported food insecurity and four times more families reported difficulty paying for household expenses.
Maine is one of 12 states that also has its own child tax credit program, the Dependent Exemption Tax Credit, which now provides $300 for each qualifying dependent and $600 for children under age six. The Institute for Taxation and Economic Policy (ITEP) estimates that about 153,000 households currently receive this credit. The Maine legislature modernized the credit in 2023 by removing minimum income requirements and indexing the credit to inflation, meaning an estimated 50,000 low-income families (including 35,200 dependent adults and 73,000 children) gained access to the full benefit, and the credit doesn’t lose value if inflation rises. In 2025 the legislature improved the credit further by doubling the amount for kids under age six and better targeting low- and middle-income families by phasing out the full credit for those who make $100k per year ($150k for joint filers). ITEP estimates this change will boost incomes for over 47,000 families, including more than 67,500 children.

Did you know…?

The Child Tax Credit was first introduced in 1997 as a $400 income-qualifying credit as part of the Taxpayer Relief Act enacted during the Clinton administration. The credit was later increased and expanded under George W. Bush, Trump, and Biden administrations.
The Child Tax Credit’s minimum income requirements mean that a single mom of two making $15,000 per year gets half the credit of a family making $150,000 per year.
87% of the anti-poverty impact of the Biden-era expanded Child Tax Credit came from eliminating the minimum income requirement.
Only children who are US citizens are eligible for federal Child Tax Credit benefits. About one million children are left behind by this rule, including 500 in Maine.
Researchers recently looked for evidence that the expanded Child Tax Credit reduced participation in the labor force. They found no evidence that it did and, in fact, analysis suggests that like the Earned Income Tax Credit, an expanded Child Tax Credit may actually help increase labor force participation.