Family Provisions in the Ways and Means Tax Package

Earlier this month, the House Ways and Means Committee unveiled its long-awaited tax package to extend or revise the temporary provisions enacted as part of the 2017 Tax Cuts and Jobs Act (TCJA)—set to expire at the end of the year. This comprehensive bill includes changes to several family provisions in the tax code.

Simplifying the Standard Deduction for Families

The standard deduction reduces the households’ taxable income and plays a key role in making the federal income tax more progressive. Before 2017, taxpayers could claim a relatively modest standard deduction–$6,500 for single, $9,550 for head of household, and $13,000 for married filers—along with personal exemptions of $4,150 each for the filer and their spouse. In 2017, Congress temporarily eliminated personal exemptions and plowed the savings into increasing the standard deduction to $12,000 for single filers, $18,000 for head of household filers, and $24,000 for married couples filing jointly. Indexed for inflation since the Reagan era, the standard deduction has continued to grow and currently stands at $15,000 for single filers, $22,500 for heads of household, and $30,000 for married couples.

These changes—along with new caps on the mortgage interest deduction and state and local tax deduction—collectively simplified the tax code by reducing the incentive for most tax filers to itemize. Before the TCJA, around 30% of taxpayers itemized these deductions; since its enactment, that number dropped to about 10%. While these provisions are set to expire at the end of the year, the proposed tax package would make them permanent, preserving these long-overdue steps toward a simpler and more streamlined tax system.

In addition, the proposed changes include temporary expansions of the standard deduction, raising it by $1,000 for single filers, $1,500 for head-of-household filers, and $2,000 for married couples filing jointly through 2028. While the TCJA’s initial increase to the standard deduction significantly reduced tax complexity, it remains unclear how these additional increases would affect taxpayers’ decisions to itemize—particularly amid ongoing debates over the future of the SALT deduction cap. From a simplification standpoint, making the current SALT cap permanent would likely do more to preserve a streamlined tax code than further expanding the standard deduction.

Furthermore, increasing the standard deduction for head of household filers would exacerbate the well-documented marriage penalties for single parents that are already built into this filing status. As the bill moves through the House and Senate, Congress may consider scaling back the head of household standard deduction in tandem with reforms to the Child Tax Credit. This approach could support single parents while reducing the financial penalty they face if they choose to marry.

Simplifying the Child Tax Credit for Families

The Child Tax Credit consists of two parts: a nonrefundable portion that reduces household tax liability dollar for dollar, and a refundable portion that phases in based on household earnings, regardless of tax liability. Prior to 2017, the CTC provided up to $1,000 per child, in addition to personal exemptions of $4,150 for each dependent. The refundable portion of the CTC phased in at 15% for each dollar earned after the first $3,000 until reaching the maximum amount. It phased out at a 5% rate for head of household filers earning more than $75,000 and married filers earning more than $110,000. 

In 2017, Congress temporarily eliminated dependent exemptions and plowed the savings into doubling the CTC to $2,000 per child. The expanded credit was significantly broader in scope: it lowered the earnings threshold for phasing in the refundable portion from $3,000 to $2,500, increased the maximum refundable amount from $1,000 to $1,400, and indexed that amount to inflation. The phaseout thresholds were also raised—from $75,000 to $200,000 for head of household filers and from $110,000 to $400,000 for married filers. However, unlike the refundable portion, the nonrefundable portion was not indexed for inflation. The reform also introduced a new requirement: each child claimed for the credit must have a valid Social Security Number (SSN).

Taken together, these changes simplified the tax code by reducing the number of overlapping and duplicative tax benefits for families with children from five to four. It also eliminated the marriage penalties that had been built into the CTC since it was first introduced in 1997. Those provisions are set to expire at the end of the year. The tax package would make them permanent, ensuring these families do not face the return of the more complicated and less generous pre-2017 family tax benefit system.

The proposal also introduces indexation to other parts of the Child Tax Credit for the first time. Starting this year, the maximum amount of the nonrefundable portion will be indexed for inflation, although the phaseout thresholds will remain unindexed. This change aligns the nonrefundable portion with the refundable portion, which Congress indexed in 2017. Nonindexation of the nonrefundable portion has resulted in a 20% decline in the real value of the credit for middle class families since 2017. While the proposed changes won’t reverse this loss, they will prevent further erosion going forward. Additionally, the proposal temporarily increases the maximum nonrefundable credit from $2,000 to $2,500 through 2028, after which it will revert to the inflation-adjusted $2,000.

As the bill moves through the House and Senate, Congress may consider scaling back the head of household standard deduction in tandem with reforms to the Child Tax Credit. This approach could support single parents while reducing the financial penalty they face if they choose to marry.

Lastly, the proposal expands the credit’s SSN requirements to include parents claiming the credit. This would bring the CTC in line with the changes Congress made to the EITC in 1996 in response to concerns about unauthorized immigration. It is also standard practice in other countries to require SSNs for parents and children when claiming family tax benefits. However, it’s important to note that these countries typically have different immigration policies and demographic patterns, and have not experienced the same scale of mixed-status families as the United States.

Boosting Earned Income Tax Credit Program Integrity

Although Congress did not make specific changes to the Earned Income Tax Credit (EITC) in 2017, concerns about the program’s integrity have persisted for decades. In 2023, the EITC improper payments made up about one-third of total payments, amounting to $21.9 billion. There is a broad consensus that these issues stem from the credit’s complex income and qualifying-child eligibility requirements and the IRS’ limited ability to verify eligibility in a timely manner. The current strategy for reducing improper payments relies heavily on IRS audits, a process that can be burdensome for both taxpayers and the agency, and has raised increasing concerns about fairness and equitable treatment.

The proposed change would direct the Treasury Secretary to establish a new EITC certification program aimed at reducing errors related to qualifying children. Under the proposal, the Secretary would have until 2028 to develop an application process, including an online portal where parents could submit the required information and documentation—determined by the Secretary—to verify that they meet the credit’s qualifying child requirements. Once verified, parents would receive an EITC certificate, which they would be required to submit with their tax return when claiming the credit.

The IRS piloted and studied a similar program two decades ago, finding that it reduced improper payments in two ways. First, the program led to behavioral changes: fewer parents applied for the credit in the certification test group ($36.9 million in claims) compared to the control group that followed the regular process ($41.2 million in claims). Of the $4.3 million difference, the IRS estimated that $2.9–$3.3 million represented deterred erroneous claims, while $1.1–$1.4 million resulted from the unintended deterrence of eligible claimants. Second, the certification process significantly improved claim accuracy. The certification test group prevented $10.9 million in erroneous payments versus just $1.4 million prevented by the regular process. 

The results suggest the proposed EITC certification program—if designed correctly—would effectively address the credit’s persistence program integrity issues. As it considers this proposal, Congress should take care to minimize administrative burdens that could unintentionally prevent eligible families from accessing the EITC. This includes taking advantage of the IRS’s expanded portal capabilities, integrating data from other agencies that would help applicants automatically verify relevant information, potentially allowing continuous certification once established until household circumstances change. Additionally, it will be essential to allocate sufficient funding for IRS outreach and support services to assist filers as the new process is implemented.

Looking Ahead

While negotiations over the final package will undoubtedly continue as it moves through Congress, the family-focused provisions in the Ways and Means tax package represent a meaningful step in the right direction. 

Joshua McCabe is the Director of Social Policy at The Niskanen Center. He focuses on issues related to child poverty and household stability. 

Editor's Note: This article was first published by The Niskanen Center, and it has been reprinted here with permission.