The American Family Act amends the Internal Revenue Code to establish a new, fully refundable child tax credit with a system for monthly advance payments. This legislation aims to replace the current child tax credit, which will be terminated for taxable years beginning after December 31, 2024. The new credit is designed to provide more consistent financial support to families throughout the year.

Under the new Section 24A, a "monthly specified child allowance" is introduced, providing $300 per child aged six and older, and 120 percent of that amount ($360) for children under six. A significantly higher allowance of 800 percent of the base amount is provided for children under one month old. These amounts are subject to annual inflation adjustments to maintain their value over time.

The credit includes income-based limitations, with reductions beginning for taxpayers whose modified adjusted gross income (MAGI) exceeds initial thresholds of $150,000 for joint filers or $112,500 for other filers. A secondary reduction applies at higher MAGI thresholds of $400,000 for joint filers or $300,000 for other filers. The bill defines a "specified child" as an individual under 18 who lives with the taxpayer for more than half the month, receives uncompensated care, is not the taxpayer's spouse, and meets citizenship or residency requirements.

To ensure fair distribution, the bill includes detailed tie-breaker rules for situations where multiple taxpayers might claim the same child, prioritizing parents and then individuals with higher adjusted gross income. It also addresses temporary absences and establishes a "period of presumptive eligibility" for receiving advance payments, which can be automatically established for newborns or individuals participating in certain government programs.

The bill mandates the creation of an online portal for taxpayers to manage their advance payments and provide necessary information. It also outlines procedures for resolving competing claims for the same child and provides for retroactive payments in cases of delayed eligibility or hardship, such as domestic violence or natural disaster. These advance payments are protected from reduction, offset, or garnishment, ensuring families receive the full intended benefit.

A separate Section 24B establishes a $500 credit for "other dependents" who do not qualify as a "specified child." This credit also has income limitations, phasing out for MAGI above $400,000 for joint filers or $300,000 for other filers. Both the child tax credit and the credit for other dependents require taxpayer identification numbers for eligibility.

The legislation includes provisions for coordination with U.S. possessions, allowing them to implement similar credit systems and receive federal funding for administrative expenses. Taxpayers who improperly claim the credit due to fraud or reckless disregard will face disallowance periods. The Secretary of the Treasury is tasked with issuing regulations to implement these changes, including reconciliation of advance payments with the final credit amount at tax filing.