Child Tax Credit: How It Works, Who Qualifies, and 2025 Changes

The Child Tax Credit reduces your federal income tax by up to $2,200 for each qualifying child under age 17 for the 2025 tax year.¹ If the credit is larger than the tax you owe, up to $1,700 per child can come back as a refund through the Additional Child Tax Credit. The rules, amounts, and income limits were made permanent by legislation signed on July 4, 2025.²

How Much You Can Get

The maximum credit for 2025 is $2,200 per qualifying child. Starting in tax year 2026, that base amount adjusts upward each year for inflation, so the figure will tick up over time.³ The IRS publishes the inflation-adjusted number in a revenue procedure late in the preceding year.

The full $2,200 is nonrefundable. It can erase your tax bill down to zero, but by itself it will not generate a check. The refundable piece is a separate calculation, described further below.

Which Children Qualify

A child has to meet every one of these tests. Miss one and that child does not count for the credit.

Age: under 17 at the end of the tax year.¹
Relationship: your son, daughter, stepchild, foster child, sibling, stepsibling, or a descendant of any of them, such as a grandchild or niece.³
Residency: lived with you more than half the year. Temporary absences for school, medical care, or vacation still count as time at home.
Support: did not pay for more than half of their own living expenses.
Joint return: did not file a joint return with a spouse, unless the return was filed only to claim a refund.
Citizenship: a U.S. citizen, U.S. national, or U.S. resident alien.

The child needs a Social Security number valid for employment, issued before the due date of your return including extensions. A child with only an Individual Taxpayer Identification Number does not qualify.⁴ On a joint return, at least one spouse also needs an SSN rather than an ITIN.²

Income Limits and How the Credit Phases Out

You get the full credit if your modified adjusted gross income is at or below $200,000, or $400,000 on a joint return.¹ Above those levels, the credit drops by $50 for every $1,000 of income over the threshold. The reduction applies to the combined total of your Child Tax Credit and any Credit for Other Dependents, not child by child.³

A worked example. A married couple filing jointly has two qualifying children and $4,400 in potential credit ($2,200 each). Their income is $420,000, which is $20,000 over the $400,000 threshold. That’s 20 increments of $1,000, times $50, or a $1,000 reduction. Their credit falls from $4,400 to $3,400. At $488,000, it disappears entirely.

The $200,000 and $400,000 thresholds are not indexed for inflation. They stay put even as the credit amount itself grows over time, so more families will drift into the phase-out range as incomes rise.

Getting Money Back When Your Tax Bill Is Small

If the Child Tax Credit is larger than the income tax you owe, the leftover portion does not automatically refund itself. You have to qualify separately for the Additional Child Tax Credit, which is the refundable component. You need earned income of at least $2,500 to be eligible.¹

The refundable amount is 15% of your earned income above $2,500, capped per child. For 2025 that cap is $1,700 per qualifying child. The underlying statutory base is $1,400, adjusted annually for inflation, so the 2026 figure will be slightly higher once the IRS releases it.²

Two examples show how earned income drives the outcome. A parent earning $22,500 with two children: 15% of $20,000 (the amount over $2,500) is $3,000. The per-child cap allows up to $3,400 for two children, so the full $3,000 is refundable. A parent earning $12,500: 15% of $10,000 is $1,500, well under the cap, and that is what refunds. The 15% formula, not the cap, is what limits most lower-income families.

What About Older Kids and Other Dependents

If someone you support does not qualify for the Child Tax Credit because they are 17 or older, have an ITIN instead of an SSN, or fall outside the relationship rules, you may still be able to claim the Credit for Other Dependents. It’s worth up to $500 per dependent, uses the same $200,000 and $400,000 phase-out thresholds, and covers dependents of any age, including elderly parents you support.⁵ It’s entirely nonrefundable, so it can reduce tax to zero but will not generate a refund.

How to Claim It

You claim the credit on Form 1040 by listing each qualifying child in the dependents section with name, SSN, and relationship. The math happens on Schedule 8812, which walks through the income phase-out and the refundable portion.⁶ Tax software handles this automatically. If you’re filing by hand, the ACTC calculation on Schedule 8812 is where errors tend to happen.

Filing electronically with direct deposit is fastest. The IRS issues more than nine out of ten refunds in less than 21 days when returns are filed electronically.⁷ One timing rule to know: if your refund includes the Additional Child Tax Credit, federal law requires the IRS to hold your entire refund until mid-February, even parts unrelated to the ACTC.⁸ You can check refund status with the IRS “Where’s My Refund?” tool.⁹

Divorced or Separated Parents

Only one parent can claim a given child in a given year. When parents live apart, the default gives the credit to the parent the child lived with for more of the year. If time was equal, it goes to the parent with the higher adjusted gross income.¹⁰

The custodial parent can transfer the claim by signing IRS Form 8332, releasing the credit for one year, several specific future years, or all future years.¹¹ The noncustodial parent attaches Form 8332 to their return each year they claim the child. A custodial parent who previously signed can revoke it for future years using Part III of the same form; the revocation takes effect no earlier than the tax year after the noncustodial parent receives a copy.

A divorce decree alone does not transfer the credit. Even if a court order says the noncustodial parent may claim the child, the IRS still requires Form 8332 or a substantially similar written release for any separation agreement executed after 2008.

If You Claim the Credit Incorrectly

Consequences go past just paying the money back. If the IRS finds you claimed the credit through reckless or intentional disregard of the rules, you’re barred from claiming it for two years after the final determination. If the claim was fraudulent, the ban runs ten years.¹² The same bans reach the Earned Income Tax Credit, the American Opportunity Tax Credit, and the Credit for Other Dependents. On top of that, an erroneous claim without reasonable cause can trigger a penalty equal to 20% of the excessive credit amount.

If the IRS previously disallowed your credit and you now qualify again, you must file Form 8862 with your return before the credit will be processed.¹³ You only need to file it once after a disallowance, so long as the credit is allowed that year and is not disallowed again.

State Child Tax Credits

About 15 states offer their own child tax credits on top of the federal one. Structures vary: some pay a flat amount per child, some calculate their credit as a percentage of the federal credit, and several pay more for younger children, especially those under six. Amounts range from a few hundred dollars to over $1,000 per child depending on the state, the child’s age, and household income. Check your state tax agency’s website to see what’s available and whether a separate form is needed.

What Changed in 2025

Public Law 119-21, signed on July 4, 2025, made the current version of the Child Tax Credit permanent and raised the maximum to $2,200 per child.² It added inflation indexing starting in 2026 for both the credit amount and the refundable cap. The $200,000 and $400,000 phase-out thresholds stay fixed and do not adjust.³ Before this law, the expanded credit was scheduled to expire at the end of 2025 and drop back to $1,000 per child with much lower income limits.

1
Internal Revenue Service. Child Tax Credit
2
Congress.gov. Public Law 119-21
3
Office of the Law Revision Counsel. 26 USC 24 – Child Tax Credit
4
Internal Revenue Service. Child Tax Credit 4
5
Internal Revenue Service. Understanding the Credit for Other Dependents
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Internal Revenue Service. 2025 Instructions for Schedule 8812 (Form 1040) – Credits for Qualifying Children and Other Dependents
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Internal Revenue Service. Get Your Refund Faster: Tell IRS to Direct Deposit Your Refund to One, Two, or Three Accounts
8
Internal Revenue Service. When to Expect Your Refund if You Claimed the Earned Income Tax Credit or Additional Child Tax Credit
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Internal Revenue Service. Where’s My Refund?
10
Internal Revenue Service. Qualifying Child Rules
11
Internal Revenue Service. Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent
12
Internal Revenue Service. What to Do if We Deny Your Claim for a Credit
13
Internal Revenue Service. Instructions for Form 8862