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U.S. Child Tax Credit May Expand in Puerto Rico

The House of Representatives Ways and Means Committee has passed a slightly expanded Child Tax Credit and the law includes Puerto Rico.

The new bill increases the Child Tax Credit from $1,600 to $1,800. It will be in force for three years, increasing slightly each year to reach $20,000 in 2025.

What is the Child Tax Credit?

Most American families with children can receive a tax credit for each child. This is a refundable tax credit — that is, the funds are provided even to families who do not owe that much in taxes. The result is therefore to increase the income of families bringing up future taxpayers.

However, the Child Tax Credit is only partially refundable. It cuts tax obligations by up to $2,000 per child, but people who owe less than that amount in taxes can receive just $1,600 (to be increased to $1,800) per child from the government.

The credit will be available to people earning $2,500 to $200,000 per year, or $400,000 for couples, with a phase-in that means people with lower incomes receive less than those with higher incomes. Families that earn less than $2,500 dollars per year are not eligible at all. Above that minimum, the credit then phases in at a rate of 15% per dollar of earnings over $2,500.

Across the nation, more than one quarter of children are excluded from the credit because their parents do not earn the minimum required amount. Democrats on the Ways and Means Committee attempted to amend the new bill to cover the poorest families, but those amendments failed.  The Committee Chairman, Rep. Jason Smith (R-MS), was quoted by El Nuevo Dia as saying that he and fellow Republicans “support minimum work requirements to promote a connection to the workforce and greater prosperity.”

In 2021, the Child Tax Credit was expanded, providing up to $3600 for each qualifying child. That expansion expired at the end of 2021. Child poverty was halved in 2021, and with the end of the credit expansion, it more than doubled in 2022.

Child Tax Credit in Puerto Rico

Until 2021, families in Puerto Rico could not claim the Child Tax Credit unless they had three children in the household.  Most families were not eligible because they had less than three children. Even families that did qualify to  receive the tax credit only received it for their first two children.  In 2021, the Child Tax Credit was extended to Puerto Rico families for each and every child.

According to data compiled by Puerto Rico’s Instituto Desarrollo Juventud, the 2021 law had a potential $1.78 billion impact on the local economy and a corresponding 16% increase in the average family income if all eligible families  applied for the tax credit.

Families which did not claim the Child Tax credit for 2021 can still claim it through April 15, 2025, by filing a federal tax return. 

Now that family size is no longer an obstacle for Puerto Rico, the Island still faces an inequity. Since the income levels in Puerto Rico are much lower on average than in the states, Puerto Rico families are more likely to be cut off from the benefit because their incomes are too low. The 2021 credit did not require a minimum income and was fully refundable.


Updated on January 23, 2024 to include data compiled by the Instituto Desarrollo Juventud. 

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