Family First Act: Bigger Child Tax Credits, New Perks for Pregnant Moms, But Some Tax Breaks Axed

The Family First Act is a mixed bag of tax changes aimed at families, set to kick in after December 31, 2025. It significantly boosts the Child Tax Credit, introduces a new credit for pregnant mothers, and simplifies the Earned Income Credit (EIC). However, it also eliminates some existing tax breaks, potentially offsetting gains for some families. Let's break down how this could affect your wallet.

Cradle to College: New Credits and Qualifications

The biggest change is the expanded Child Tax Credit (SEC. 101). Families with kids under 6 could get $4,200 per child, while those with older kids (under 18) get $3,000. There's a catch, though: if you make under $20,000, you only get a percentage of the credit, calculated by dividing your income by $20,000. This means a single mom working part-time, making $15,000 a year, would only receive 75% of the credit ($15,000/$20,000). The full credit is available to those earning $20,000 or more, but it starts phasing out for joint filers making over $400,000 and single filers over $200,000. The credit is capped at six children. For example, a family with seven children will only receive the credit for six.

There's also a new tax credit for pregnant mothers (SEC. 102). If you're at least 20 weeks pregnant, you could get $2,800, as long as you provide a doctor's certification. Similar to the Child Tax Credit, those making under $10,000 get a reduced amount, using the same percentage calculation. The full credit is available to those making over $10,000. High earners will see this credit phase out above $400,000 (joint) or $200,000 (single). Notably, the bill specifies that this credit won't be available in cases of induced abortions (excluding life-saving procedures or ectopic pregnancies).

Earned Income Overhaul: Simpler, But...

The Earned Income Credit (EIC) gets a makeover (SEC. 201), aiming for simplicity. For families with kids, the maximum credit is $4,300 (single) or $5,000 (joint), with a flat 25% credit percentage and a 10% phaseout. However, there's a complex exception for "exempted children" (defined elsewhere in the tax code), where the old EIC rules still apply. This could create a confusing two-tiered system for some families. For those without children, the maximum credit is $700 (single) or $1,400 (joint).

Trade-Offs and Tightened Rules

To offset some of these benefits, the bill eliminates the additional exemption for dependents (SEC. 202) and the head of household filing status (SEC. 203). This means many single parents who previously qualified for head of household status will now file as single, potentially increasing their tax burden. The bill also tightens the rules for the Child and Dependent Care Tax Credit (SEC. 204), excluding children 18 and over and requiring that care outside the home only counts if the child or dependent spends at least 8 hours a day in the taxpayer's home. This could impact families with older children needing after-school care or those who rely on daycare centers where the child spends less than 8 hours at home. However, there's a win for those in high-tax states: the bill removes the limit on deducting state and local taxes (SALT) (SEC. 205), a significant benefit for itemizers.

The Bottom Line

The Family First Act presents a complex set of changes. While many families, especially those with young children or low incomes, will likely see increased financial support, others, particularly single parents who previously used the head of household status, may see their tax burden increase. The new credit for pregnant mothers is a novel addition, but its restrictions and potential for complicated income calculations need careful consideration. The simplification of the EIC is welcome, but the "exempted children" clause could create confusion. The removal of the SALT deduction cap is a clear benefit for high-income earners in high-tax states. It is crucial to note that the potential for fraudulent claims exists, especially regarding the pregnant mother's tax credit and the EIC. The bill includes specific certification requirements for the pregnant mother tax credit, and the EIC changes may require careful monitoring to prevent abuse.