The Child Tax Credit is one of the largest family-focused tax benefits in the federal code, worth up to $2,000 per qualifying child under age 17 at the end of the tax year. For 2025 returns filed in early 2026, the credit remains at the level set by the Tax Cuts and Jobs Act of 2017 (TCJA), with a refundable portion capped at $1,700 per child and a phase-out beginning at $200,000 of modified adjusted gross income for single filers and heads of household and $400,000 for married couples filing jointly. The 2025 parameters are largely unchanged from 2024, but a Social Security number requirement that took effect in 2024 is now firmly in force, and the entire enhanced credit structure is scheduled to sunset at the end of 2025 unless Congress extends it. Families with children should plan around both the current rules and the potential reversion to a $1,000 credit in 2026.
The $2,000 Credit and the $1,700 Refundable Cap
The Child Tax Credit under TCJA is structured as two layers. The base credit is $2,000 per qualifying child, applied first against federal income tax liability. If the credit exceeds your tax liability, the unused portion can be refunded as the Additional Child Tax Credit (ACTC), but only up to $1,700 per child for 2025 — up from $1,600 in 2024. The remaining $300 of the credit is non-refundable, meaning it can only offset tax you actually owe. A family with two qualifying children and $0 federal tax liability receives $3,400 in refundable ACTC and forfeits the remaining $600 of non-refundable credit.
The refundable portion is calculated under a formula in IRC § 24(d): the ACTC equals 15% of earned income above $2,500, capped at $1,700 per child. A family with $20,000 of earned income and two children would compute 15% of $17,500 ($20,000 minus $2,500), or $2,625 — but capped at the per-child limit of $3,400 for two children, so they receive the full $3,400. A family with $10,000 of earned income would compute 15% of $7,500, or $1,125, well below the $3,400 cap, and receive only $1,125 as the ACTC even with two qualifying children. This earned-income floor is the reason very low-income families receive less than the headline $2,000 amount, despite having qualifying children.
The Five Tests for a Qualifying Child
A child must satisfy five tests under IRC § 152(c) to be a qualifying child for the CTC. The relationship test requires the child to be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of them (including grandchildren, nieces, and nephews). The age test requires the child to be under 17 at the end of the tax year — a child who turns 17 on December 31 does not qualify. The support test requires the child to not have provided more than half of their own support during the year, which matters for teenagers with part-time jobs but rarely disqualifies younger children. The dependent test requires the child to be claimed as your dependent, which means they must meet the dependent rules separately. The residency test requires the child to have lived with you for more than half the year, with exceptions for temporary absences due to school, illness, or vacation.
For 2024 and later returns, the child must also have a valid Social Security number issued before the due date of the return. This requirement was added by TCJA and took effect for tax year 2024, meaning children with only an Individual Taxpayer Identification Number (ITIN) or Adoption Taxpayer Identification Number (ATIN) are not qualifying children for the CTC. An adopted child who is a U.S. citizen or resident can qualify if they receive an SSN before the return's due date. Children who are not U.S. citizens or residents cannot qualify for the CTC, even with an SSN, because the residency requirement in IRC § 24(b)(3) limits the credit to children who are U.S. citizens, U.S. nationals, or U.S. residents.
Income Phase-Outs and the $50 per $1,000 Math
The credit begins to phase out when modified adjusted gross income exceeds $200,000 for single filers and heads of household, or $400,000 for married filing jointly. The phase-out reduces the credit by $50 for every $1,000 of MAGI above the threshold — a slow, gentle phase-out that allows significant income above the threshold before the credit disappears entirely. A married couple with two children ($4,000 of potential credit) and $480,000 of MAGI would lose $50 × 80 = $4,000 of credit, leaving them with $0. The same couple with $430,000 of MAGI would lose $50 × 30 = $1,500, leaving $2,500 of credit.
The phase-out is the same for the refundable and non-refundable portions — they are reduced proportionally. The thresholds are not indexed for inflation under TCJA, which means the real value of the phase-out threshold erodes each year. For 2025, the same $200,000 and $400,000 thresholds apply, even though inflation has pushed wages upward since the credit was restructured in 2018. This is one reason the credit becomes less generous in real terms each year, even at the headline $2,000 amount.
The $500 Credit for Other Dependents
TCJA created a parallel credit for dependents who do not qualify for the $2,000 Child Tax Credit — the Credit for Other Dependents (ODC). The ODC is worth $500 per dependent and is entirely non-refundable. It applies to children who are 17 or older at year-end, to children with ITINs instead of SSNs, to elderly parents claimed as dependents, and to other qualifying relatives under IRC § 152(d). The same $200,000 / $400,000 phase-out thresholds apply, and the credit is calculated on the same Form 8812.
The ODC has its own set of supporting tests. A qualifying relative cannot have gross income above the dependency exemption amount ($5,200 for 2025), must receive more than half of their support from the taxpayer, must not be a qualifying child of anyone else, and must live with the taxpayer all year as a member of the household (or be related in one of the specified relationships). Adult children away at college, parents in assisted living, and disabled adult siblings are the most common ODC recipients. The ODC cannot be combined with the $2,000 CTC for the same dependent — you get one or the other, never both.
Form 8812 and the Additional Child Tax Credit
The mechanics of calculating the refundable portion live on Form 8812, "Credits for Qualifying Children and Other Dependents." The form begins with the $2,000 per child amount, subtracts the phase-out, and subtracts the credit used to offset tax liability. The remainder is potentially refundable as the ACTC, subject to the $1,700 per-child cap and the 15%-of-earned-income-above-$2,500 formula. The form also handles the ODC calculation separately, since the ODC has no refundable component.
Families claiming the ACTC must also file Schedule 8812 with their Form 1040 and include the SSN for each qualifying child. The IRS cross-references the SSN against the Social Security Administration's records, and mismatches — typically caused by name changes, adoption finalizations, or clerical errors — can delay refunds by months. The IRS also matches the dependent's SSN against prior-year filings; a child claimed for the first time on a return after being claimed by another parent in a prior year can trigger an audit or a CP05 notice requiring documentation of residency and support. Keeping school records, medical records, and childcare receipts is essential documentation that can short-circuit these inquiries.
The 2026 Sunset: What Changes If Congress Does Not Act
The current enhanced CTC structure is scheduled to expire at the end of 2025 under the sunset provisions in TCJA. If Congress does not act, the credit reverts to its pre-2018 form for tax year 2026: a $1,000 per child credit, with a refundable portion equal to 15% of earned income above $3,000, capped at the lesser of $1,000 per child or the unused credit. The phase-out thresholds would drop to $75,000 for single filers, $112,500 for heads of household, and $110,000 for married filing jointly — a much steeper cliff than the current $200,000 / $400,000 thresholds. The age limit would also revert to under 17, which is unchanged, but the SSN requirement (which was added by TCJA) would technically lapse as well, though Congress may extend it separately.
The political history of the CTC since 2021 — including the temporary expansion to $3,600 per child under the American Rescue Plan, the failure of the Build Back Better Act to make that expansion permanent, and the ongoing debate over a bipartisan compromise in the range of $2,100 to $2,500 — suggests Congress is likely to address the sunset, but the timing and the parameters are uncertain. Taxpayers with children should file timely under the current rules, document their eligibility, and prepare to recalculate if the credit amount changes for 2026. To estimate your current CTC and ACTC, including the refundable portion, use our Child Tax Credit calculator, which applies the 2025 phase-out and the earned-income formula.
For a broader look at how the CTC fits into family tax planning alongside dependent care credits and education credits, see our federal tax brackets guide, which explains how credits interact with marginal and effective rates.
Last reviewed July 4, 2026. This article is informational and does not constitute legal, tax, or financial advice. Consult a qualified professional for guidance specific to your situation.