The Child Tax Credit will grow in 2025, making it possible for more families to get this important financial help.
This project, which is being led by the Internal Revenue Service (IRS), aims to make some of the financial burdens of having children easier, especially since family costs keep going up. With this increase, more people will be able to lower their tax bills and possibly get bigger tax refunds.
As a direct result of the Child Tax Credit, a family pays less in taxes. This is different from a reduced amount of taxable income.
This means that you might get a bigger tax return at the end of the year. In the past few years, the IRS has made this credit available to a wider range of families to help them deal with the rising costs of having children.
Expansion of the Child Tax Credit: what you need to know for 2025
Another new thing is the IRS’s Direct File program, which will make paying taxes easier and free for people. The program started in 2024 in 12 states and will grow to 24 states by 2025, letting millions more people use this tool. Direct File is made for people whose tax forms are simple, like those who get income from wages (W-2), Social Security benefits, or unemployment benefits.
More than 140,000 people used the tool successfully during its pilot phase in 2024. In many cases, they were able to finish their taxes in less than an hour. This tool not only makes filing taxes easier, but it also makes sure that the numbers are correct, which helps users get the biggest refund possible.
New options for credits and deductions
Taxpayers will have more ways to claim extra credits and discounts through Direct File in 2025. As a result of the important improvements, users will be able to enjoy the following:
- Child and Dependent Care Credit
- Credit for the Elderly or Disabled
- Health Insurance Premium Tax Credit
Taxpayers will also be able to subtract payments made to Health Savings Accounts (HSAs), for educational costs, and for student loan interest. These changes are meant to make sure that taxpayers can get the most out of the credits and deductions they are eligible for without having to pay more for tax planning services.
Who will benefit the most?
The Child Tax Credit and Direct File increase will benefit working families. By simplifying the tax filing process and expanding credits and deductions, the IRS is helping families benefit from these programs without pricey tax preparation.
Direct File is now unavailable to taxpayers who want to itemize deductions, such as those with big medical bills, charitable donations, or property tax payments. Expanding the program to cover more tax scenarios is being done by the IRS.
Improved customer service for taxpayers
Along from expanding its offerings, the IRS is improving Direct File customer assistance. Starting in 2025, taxpayers can use live chat in English and Spanish for real-time tax filing assistance.
Improved authentication and verification will allow customer care personnel to deliver more detailed answers to specific questions. Taxpayers can request callbacks for technical support or basic tax issues to get help quickly.
The IRS is committed to making tax filing easier and less stressful for families. By expanding the Child Tax Credit and Direct File program, the IRS hopes to reach more taxpayers who found the process confusing or daunting.
This effort benefits those who used third-party tax return services. With these changes, the IRS hopes to simplify filing for uncomplicated tax circumstances, allowing taxpayers to keep more of their money.