American Family Act Replaces Annual Child Tax Credit with Monthly Checks Up to $360, Starting 2025

The new American Family Act completely changes the Child Tax Credit (CTC), swapping the current annual lump sum for a system that sends families monthly checks starting in 2025. This isn't just a scheduling change; it’s a major boost, especially for families with young kids. Under the new rules, the credit becomes fully refundable—meaning you get the money even if you don't owe taxes—and provides up to $360 per month for each child under age six, and $300 per month for children aged six to 17. The biggest monthly payment, a whopping $2,400, is reserved for children under one month old, recognizing the massive upfront costs of a newborn. This shift is designed to put consistent, predictable cash flow into family budgets.

The Monthly Cash Flow: What’s in Your Pocket?

For most families, the biggest change is the guaranteed monthly payment (Section 7527A). Instead of waiting until tax season to get a big refund, you’ll receive an estimated portion of your credit every month. For a family with a four-year-old and an eight-year-old, that’s $360 plus $300, or $660 coming in monthly. This kind of reliable income can be a game-changer for budgeting, helping families cover expenses like childcare, groceries, or unexpected bills without waiting for an annual windfall. The bill also protects these payments: they can’t be reduced or offset for most federal debts or back taxes, similar to how Social Security benefits are protected, ensuring the money actually reaches the family.

The Income Line: Who Gets the Full Benefit?

Like any tax credit, the amount you get starts to shrink once your income hits certain levels (Section 24A). The full monthly benefit begins to phase out for joint filers earning over $150,000 in Modified Adjusted Gross Income (MAGI), or $112,500 for single filers. If you’re near that threshold, the IRS will estimate your eligibility based on your income from the previous year, or even the year before that, giving you some flexibility. There is a secondary, steeper phase-out that kicks in at much higher income levels ($400,000 for joint filers), showing that while this is a broad benefit, it’s heavily weighted toward middle and lower-income households.

The Catch: Reconciling Payments and the Repayment Risk

Here’s where things get complicated, and where busy people need to pay attention. Since the IRS is sending you an estimated amount every month, you must reconcile the total advance payments you received against the actual credit you qualify for when you file your annual taxes (Section 24A). If your income went up during the year, or if you lost a child dependent due to age or custody changes, you might have received more in advance payments than you were actually due. If that happens, the bill requires you to pay back the excess amount through an increase in your tax liability. For example, if you got $3,600 in advance payments but only qualified for $3,000, you’ll owe the IRS $600 when you file. This repayment risk means families who experience income instability or life changes need to monitor their eligibility closely or risk an unexpected tax bill.

Other Dependents and Serious Penalties

For dependents who don’t qualify for the new monthly CTC—like older relatives or college students—the bill creates a separate, non-refundable $500 credit (Section 24B). This is a smaller, annual benefit that helps offset costs for those you support who aren't your minor children. Finally, the bill gets serious about protecting the system from fraud. If you fraudulently claim the monthly credit, you face a severe 10-year ban from receiving the credit. Even reckless disregard for the rules can result in a two-year ban. This is a clear signal that while the money is easier to access, the consequences for abusing the system are significant.