What Congress Proposes for Family Tax Credits: Red Tape for the Poor

As Congress sends its latest tax proposal to President Donald J. Trump, both the House and Senate versions of the One Big Beautiful Bill Act (OBBBA) have claimed to support working families. However, rather than directing the Child Tax Credit (CTC) toward families who need it most by increasing the refundable portion or phasing in benefits more quickly, the proposed changes primarily benefit higher-income households. At the same time, the bills impose new layers of red tape that will make it harder for low-income families to access the Earned Income Tax Credit (EITC), leading to fewer working families receiving the support for which they qualify. The rhetoric may be pro-family, but the substance of the two family-focused tax provisions undercuts millions of low-income parents and children.

Here’s what families need to know about what the House and the Senate each proposed, what’s missing, and what’s at stake.

CTC: Modest Increases for Some, Exclusion for Others

Both the House and Senate bills expanded the CTC, but in modest and temporary ways. The House version raises the maximum per-child credit from $2,000 to $2,500 from 2025 through 2028 before returning to $2,000 (with inflation indexing). The Senate offers a smaller bump to $2,200 beginning in 2025, with annual inflation adjustments starting in 2026.

Yet these increases wouldn’t reach the families who need them most. Both bills retain the partially refundable structure of the Tax Cuts and Jobs Act, capping refundability at $1,700 in 2025 and phasing it in slowly based on earnings above $2,500. As a result, low-income families with little or no tax liability still wouldn’t receive the full credit. For example, a family with three children must earn at least $40,000 to access the full refundable amount, while those earning up to $400,000 would remain eligible for the full benefit. This means children in higher-income families stand to gain more than the roughly 20 million poorest children, who will continue to be excluded from the full credit.

Rather than expand access, the House version of OBBBA introduced new hurdles that could strip eligibility from millions of otherwise qualifying children. Since 2018, children have needed a valid Social Security Number (SSN) to qualify for the CTC. The House bill went further, requiring that both parents have SSNs to claim the credit—even if their child is a U.S. citizen.

This change would disqualify an estimated 4.5 million American children, many of whom live in mixed-status immigrant families. The Senate bill is less restrictive: It allows families to claim the credit if at least one parent has an SSN. The House bill also bars parents who file as married filing separately from claiming the credit—another exclusion not mirrored in the Senate proposal.

In 2021, Congress temporarily made the CTC fully refundable, expanded the benefit to $3,600 for young children, and delivered payments monthly. Results were dramatic: Child poverty dropped by nearly half, families reported greater financial stability, and racial disparities in poverty narrowed. Take-up was high, administration was smooth, and the funds helped families cover rent, food, child care, and other basics. In short, the policy was an unprecedented success.

Refundability was key to that success. Nonrefundable credits mainly help families who owe taxes—typically those higher up the income scale. But full refundability allowed low-income families with little or no tax liability to receive the full credit as cash, functioning as real income support. Without it, the children most at risk are excluded by design. These new proposals ignore nearly all of those lessons, offering a pared-down version that leaves behind the very families who gained the most.

EITC: Increased Red Tape

While the CTC sees modest increases, the EITC is the focus of new enforcement rules rather than expanded benefits. Both the House and Senate bills introduce a controversial pre-certification requirement: Beginning as early as 2026, families must pre-verify their child’s eligibility with the Internal Revenue Service (IRS) before claiming the EITC. This would be a major departure from current practice. Nearly 20 million families with children claim the EITC each year, and most would be forced to complete detailed IRS paperwork to prove relationship and residency before receiving the credit. The only expansion comes in the form of a narrowly targeted provision granting a one-time EITC boost to Purple Heart recipients who lost disability benefits after returning to work—an important but limited change likely to affect only tens of thousands of veterans, compared to the millions of families who may be excluded or discouraged from claiming the EITC due to new barriers.

These burdens won’t fall evenly. Families of color—especially Black and Hispanic households—are already disproportionately targeted for audits and face higher denial rates. Grandparents, aunts, or older siblings raising children may struggle to navigate the new certification system, even when fully eligible.

This new pre-certification requirement would function like a universal audit for low-income families. Under the proposal, millions of EITC claimants would be forced to proactively submit documentation proving their child’s relationship and residency before filing—effectively shifting the burden of proof onto families long before any refund is issued. This approach would dramatically increase administrative demands on the IRS, which would need to verify millions of cases in advance of tax season. Because IRS resources are limited, ramping up enforcement against low-income families would inevitably divert staff away from auditing high-income filers and corporations, despite the fact that these groups are responsible for the vast majority of tax avoidance and underpayment. The legislation would also create a Treasury Department task force to oversee EITC administration and reduce improper payments, further formalizing this shift in scrutiny toward low-income households.

The concern driving these changes—the EITC’s “improper payment” rate—is often overstated. While the rate is officially reported at 24 to 33 percent, most errors result from technical issues or complex family arrangements—not fraud. Only about 7 to 8 percent of EITC dollars are linked to intentional misuse, and actual fraud accounts for just 4 percent. In fact, most errors still support the child’s household or reflect well-intentioned claims. Treating these figures as evidence of widespread abuse is a misplaced concern that risks undermining a highly effective program.

This approach has failed before. A 2003 IRS pilot program using a similar certification model caused many eligible families to drop out of the program entirely. Once again, the added red tape will deter legitimate claims and delay refunds, sharply diminishing a program with decades of evidence showing it boosts work, reduces poverty, and improves child outcomes.

Conclusion: A Missed Opportunity

If the House’s proposal becomes law, some middle- and upper-middle-income families will enjoy a $500 bump per child for four years. But the lowest-income families—the ones most helped by the 2021 CTC expansion—would still be left behind. And under new rules, millions of immigrant children or children living with parents who lack SSNs could lose access completely.

At the same time, EITC claimants—especially those with complex family structures—could face confusing and burdensome new IRS requirements. For working parents already navigating tax season, this may mean delays, lost refunds, or abandoned claims.

The House and Senate tax proposals may claim to help families with children, but they actually represent a retreat from meaningful reform. Rather than incorporating reforms that would help lower- and middle-income families, these bills entrench a regressive structure and add new barriers. Lawmakers still have time to choose a better path—one that delivers for all children, not just those in higher tax brackets.