Director of Federal Fiscal Policy
Unless Congress acts, key Child Tax Credit (CTC) and Earned Income Tax Credit (EITC) provisions will expire at the end of 2017, pushing 17 million people — including 8 million children — into or deeper into poverty. As we’ve noted here and here, making these provisions permanent should be a key priority for Congress.
Our new interactive calculator, below, allows you to explore what’s at stake for low- and moderate-income families if three important provisions expire at the end of 2017:
CTC refundability threshold
Current provision: The CTC is worth up to $1,000 per child, and families have to work to qualify for it. A family needs to earn at least $3,000 before beginning to earn the portion of the CTC that can be received as a tax refund. The refundable CTC gradually phases in as earnings rise above that level. A family with two children cannot qualify for the full CTC unless their earnings reach $16,330.
In 2018, without action: The $3,000 earnings threshold will more than quadruple to $14,700, so families with earnings between $3,000 and $14,700 will lose their entire CTC. As the interactive below shows, a single mother who works full time at the minimum wage (earning $14,500) would see her CTC fall by $1,725, to $0 — a real hit to her ability to afford the basics. To qualify for the full CTC, a married couple with two children will need earnings of at least $28,030, so many families that will still qualify will see their credits cut substantially. About 3.7 million families, including 5.8 million children, will lose their entire CTC, and an additional 5.2 million families, including 10.6 million children, will lose part of their CTC, Citizens for Tax Justice (CTJ) estimates.
EITC marriage penalty relief
Current provision: The EITC now begins to phase down at an income level that’s $5,000 higher for married couples than for single filers.
In 2018, without action: The EITC for married couples will begin to phase out only $3,000 above single filers’ phase-out level, cutting the EITC for many low-income married filers and increasing the EITC’s marriage penalty for two-earner families.
EITC boost for larger families
Current provision: Families with three or more children can qualify for a maximum EITC that’s about $650 larger than for families with two children.
In 2018, without action: The maximum EITC for families with three or more children will be cut to the same maximum EITC as families with two children.
With the loss of these two key EITC provisions, 6.5 million families, including 15.9 million children, would lose some or all of their EITC, CTJ estimates.
This calculator does not show the impact of the American Opportunity Tax Credit, a credit to defray the costs of college, which is also set to expire at the end of 2017 under current law. Its expiration would mean the loss of tax credits for college for about 11 million families with students.