American Family Act Proposes Monthly Child Tax Credit Payments Starting After 2024

This bill, the American Family Act, fundamentally changes how the federal child tax credit works, shifting from an annual lump sum claimed on tax returns to a direct monthly payment system starting after December 31, 2024. It establishes a new Internal Revenue Code section (24A) creating a refundable credit delivered as a monthly allowance: $300 per child aged 6 and older, and a potentially higher (though unspecified) amount for children under 6. The existing annual Child Tax Credit under section 24 would be terminated for tax years beginning after 2024.

Monthly Money: How the New Credit Works

The core idea is regular financial support throughout the year. These monthly payments aren't universal, though. They begin to phase out for individuals with modified adjusted gross incomes over $112,500, heads of household over $112,500, and joint filers over $150,000. There's a secondary phase-out at higher income levels ($300k/$400k). To qualify, a child (defined as a "specified child") must meet age, residency, and relationship criteria, and the taxpayer needs to provide their name and taxpayer ID number. The bill also introduces a separate, smaller $500 credit for certain other dependents (like older children or qualifying relatives) under a new section 24B, subject to similar income limits.

Getting Paid: The Nuts and Bolts

The bill directs the Treasury Secretary to set up a system for these advance monthly payments (under section 7527A). It introduces the concept of "presumptive eligibility," meaning payments could start based on prior tax information or participation in certain government programs, with automatic eligibility envisioned for newborns. Taxpayers would be responsible for updating their information if their eligibility changes. A key feature is the required creation of an online portal where families can manage their payments, update details (like income or number of children), and potentially opt-out. The legislation specifies payments should ideally be made via direct deposit and includes protections against the funds being garnished or offset for most debts. It also includes provisions for resolving situations where multiple people might claim the same child and provides funding for implementation in U.S. possessions like Puerto Rico.

What It Means in Practice

For families currently receiving the annual Child Tax Credit, the biggest shift is the timing – moving from one larger payment after filing taxes to smaller, regular monthly deposits. This could smooth out household budgets. The online portal aims to simplify management, but relies on families having reliable internet access and staying on top of updates to avoid needing to reconcile overpayments or underpayments at tax time. The income thresholds mean higher-earning families won't receive the monthly payments, similar to current structures. The bill also tightens rules for those who've made fraudulent claims in the past. While aiming for smoother delivery, the system's success will depend heavily on effective implementation by the IRS, clear communication, and taxpayers keeping their information current via the new portal.