Recently, the Committee on Ways and Means released the “One Big Beautiful Bill.” For more information, you can read our analysis of the SALT cap, the standard deduction, and the itemized tax deduction.
It’s important to note that this is just a bill and has not been signed into law. Anything discussed is for informational purposes only, as the bill is very likely to change before becoming law. However, it does give an idea of what lawmakers are thinking and the direction they want to take.
Current child tax credit
The child tax credit (CTC) is a hotly debated, and frequently tweaked, piece of our tax law. Currently, the credit is $2,000 per qualifying child under 17 years of age. The credit phases out $50 for each $1,000 (5%) of income that exceeds $400,000 for married filing jointly (MFJ) taxpayers and $200,000 for all other filers.
Taxpayers are allowed a $500 credit for dependents who do not meet the “qualifying child” standard.
Proposed child tax credit
The proposal sets the credit at $2,500 for 2025-2028, at which point the credit drops back to $2,000 and is indexed for inflation thereafter. The phase-out thresholds of $400,000 and $200,000 are made permanent, as is the $500 credit for other dependents.
If you want to know more about how the tax law changes could impact your family, contact your wealth advisor. Not a Mercer Advisors client? Let’s talk.
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