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This blog post is part of a series dedicated to analyzing the impact of the Tax Cuts and Jobs Act. Click here to see all of the blogs in the #TCJANowWhat series.
The Tax Cuts and Jobs Act (TCJA) significantly changed the provisions surrounding how families with children were treated under the individual income tax, but for many, it barely changed what they owed in taxes.
The TCJA doubled the child tax credit (CTC) from $1,000 per child under age 17 to $2,000 per child under age 17. It also added a $500 credit for older children and other dependents, eliminated the personal exemption for dependents, lowered marginal income tax rates, and made several other changes affecting families with children. Most families did see their taxes drop in the near term because of how all the TCJA’s changes fit together. Focusing only on the provisions intending to broadly subsidize families — the CTC, the personal exemption, the standard deduction, and the child and dependent care tax credit — total benefits remained roughly constant and were distributed similarly between the old and new law. But after 2025, when many of the individual income tax changes in the TCJA expire, families with children can expect to pay more in taxes than they would have if the law had not been changed.
The biggest increase in tax benefits for families with children came from the doubling of the CTC. Families use their CTC to first offset income taxes owed. If the credit exceeds taxes owed, families may receive up to $1,400 per child as a refund — an increase from $1,000 under prior law. The refundable portion of the credit equals 15 percent of earnings over $2,500. Before the law change, families needed at least $3,000 to benefit from the refundable portion of the credit. Allowing families to use $500 more of their earnings to calculate their CTC increased the refundable credit by $75 per year for some low-income families who received less than the full CTC before the law changed. Other law changes barely affected this group.
Somewhat higher-income families were kept from receiving the full value of the credit because they owe less than $600 per child in income taxes (computed as $2,000 maximum CTC less the $1,400 refundable component). Roughly 27 million children under age 17 live in families who do not earn enough to receive their full $2,000 CTC per child. Benefits for many families are higher than under prior law but fall short of the maximum $1,000 benefit increase.
For middle- and high-income families who do owe enough tax to benefit from the full $2,000 per child, the new CTC benefits were partially offset by the elimination of the personal exemption for dependents (a provision that previously allowed families to deduct a little over $4,000 per child from taxable income). Some of these families also benefited from the increase in the standard deduction (depending on how much and whether they itemized deductions under prior law), to the extent it exceeded the loss of the personal exemption for taxpayers and spouses and from income tax rate cuts.
On average, families with children in the lowest one-fifth of the income distribution received $60 in additional tax benefits under the family provisions in the TCJA compared with prior law. Families with children in the highest one-fifth of the income distribution received an average of about $390 in additional benefits from the family provisions, as seen in Figure 1.
Somewhat surprisingly, the earned income tax credit (EITC) was not increased in the TCJA. Both Democrats and Republicans have called for expanding the EITC, and policymakers have used similar tools to make a tax reform more neutral — as in the Tax Reform Act of 1986. But that clearly was not a goal of this tax overhaul — which tilted benefits toward higher-income people.
After 2025, most of the individual provisions are set to expire. The CTC will return to $1,000 per child, and the personal exemption will be restored. However, as with the rest of the tax system, personal exemptions, the standard deduction, and the EITC will grow with a more conservative measure of inflation than existed pre-TCJA. The Tax Policy Center estimated that taxes would drop for a single parent earning $30,000 with no, one, or two children in 2018 but rise relative to prior law in 2027.
The TCJA changed the taxation of families with children. But rather than providing substantial additional support to such families (as the widely touted doubling of the CTC might have suggested), policymakers used the law to roughly replicate prior-law family benefits. Benefits for most families with children are not much higher under the new law, and they are distributed across the income spectrum similarly. For child advocates, this was a missed opportunity.
Elaine Maag is a principal research associate at the Urban Institute.
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The TCJA significantly changed how families with children were treated by individual income tax, but for many, it barely changed what they owed.
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