The federal family tax allowance in the United States takes the form of two credits: the Child Tax Credit, worth up to $2,200 for each qualifying child under 17 in 2026, and the Credit for Other Dependents, worth up to $500 for dependents who don’t meet the child credit’s rules. Both cut your tax bill dollar-for-dollar rather than just lowering the income you’re taxed on, and both share the same income phase-out thresholds.
How Much the Child Tax Credit Is Worth in 2026
The One, Big, Beautiful Bill (P.L. 119-21) made the Child Tax Credit permanent at $2,200 per qualifying child, with annual inflation adjustments starting in 2026.1Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments From the One, Big, Beautiful Bill The full $2,200 is non-refundable, so it can bring your federal income tax to zero but won’t produce a refund by itself. A separate calculation, the Additional Child Tax Credit, handles the refundable piece.
Personal exemptions, which used to sit alongside dependent tax breaks, remain at zero for 2026 and beyond.1Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments From the One, Big, Beautiful Bill The credits described here are what replaced them.
Who Counts as a Qualifying Child
The child must be under 17 at the end of the tax year.2Office of the Law Revision Counsel. 26 US Code 24 – Child Tax Credit Beyond age, three tests apply: relationship, residency, and support.
The relationship test reaches further than most people expect. A son, daughter, stepchild, or eligible foster child qualifies, along with any descendant of those children, such as a grandchild. Siblings, stepsiblings, and half-siblings count too, as do their descendants (a niece or nephew you’re raising, for example). Legally adopted children and children lawfully placed for adoption are treated the same as biological children.3Office of the Law Revision Counsel. 26 USC 152 – Dependent Defined
For residency, the child must share your principal home for more than half the year.3Office of the Law Revision Counsel. 26 USC 152 – Dependent Defined Temporary absences for school, medical care, or military service generally don’t break that requirement. The child also cannot have provided more than half of their own financial support during the year.4Internal Revenue Service. Child Tax Credit A teenager with a part-time job who saves most of what they earn instead of paying for housing and food can still qualify, because the test looks at what the child actually spent on themselves.
One requirement trips up many families: every qualifying child needs a Social Security number valid for employment, issued before the due date of your return (including extensions).4Internal Revenue Service. Child Tax Credit An Individual Taxpayer Identification Number or Adoption Taxpayer Identification Number will not work for the Child Tax Credit itself. Since the Tax Cuts and Jobs Act, the IRS no longer allows ATINs for this credit.5Internal Revenue Service. National Taxpayer Advocate Purple Book – Legislative Recommendation 57 A child with an ATIN or ITIN may still bring in the $500 Credit for Other Dependents instead.
The $500 Credit for Other Dependents
If someone you support doesn’t fit the qualifying child rules, they may still qualify you for the Credit for Other Dependents, worth up to $500 per person and also non-refundable.6Internal Revenue Service. Understanding the Credit for Other Dependents Common situations include:
- A 17-year-old still in high school who has aged out of the $2,200 credit but can generate the $500.
- An aging parent or other qualifying relative you provide more than half the support for.
- Someone unrelated to you who lived in your home the entire year as a member of your household.6Internal Revenue Service. Understanding the Credit for Other Dependents
The dependent must be a US citizen, US national, or US resident alien.6Internal Revenue Service. Understanding the Credit for Other Dependents For qualifying relatives (not qualifying children), the dependent’s gross income must be under $5,300 for the 2026 tax year.7Internal Revenue Service. Rev. Proc. 2025-32 Unlike the Child Tax Credit, this credit accepts an ITIN or ATIN in place of a Social Security number.4Internal Revenue Service. Child Tax Credit
Income Limits That Shrink or Erase the Credits
The two credits share one set of income limits. The phase-out begins at $400,000 of modified adjusted gross income for joint filers and $200,000 for every other filing status, including single, head of household, and married filing separately.4Internal Revenue Service. Child Tax Credit Above those thresholds your combined credit drops by $50 for every $1,000 of additional income.6Internal Revenue Service. Understanding the Credit for Other Dependents
A worked example: a single parent earning $210,000 with one qualifying child is $10,000 over the threshold. That’s ten $1,000 increments, times $50, so $500 is knocked off. The $2,200 credit becomes $1,700. At $244,000 the entire credit would be gone. Joint filers have far more room; a couple earning $430,000 with two children would lose $1,500 across their combined credits and still keep $2,900.
The Refundable Piece: Additional Child Tax Credit
The non-refundable portion can only bring your tax to zero. If you owe less than $2,200 in federal income tax, the leftover doesn’t automatically come back as a refund. The Additional Child Tax Credit makes up to $1,700 per child refundable, so you can receive it as a payment even when your tax bill is zero.4Internal Revenue Service. Child Tax Credit
To claim it, you need at least $2,500 in earned income.4Internal Revenue Service. Child Tax Credit The refundable amount is 15 percent of your earned income above that $2,500 floor, capped at $1,700 per child. A parent earning $15,000 works out at ($15,000 − $2,500) × 15% = $1,875, which exceeds the cap, so the full $1,700 per child comes through. A parent earning $6,000 gets ($6,000 − $2,500) × 15% = $525 per child. The formula matters most for lower-income families, where the credit turns into real cash rather than a reduction on paper.
Divorced or Separated Parents
When parents live apart, the custodial parent normally claims the child. The custodial parent can release that claim by signing IRS Form 8332, which allows the noncustodial parent to claim the Child Tax Credit, the Additional Child Tax Credit, and the Credit for Other Dependents for that child.8Internal Revenue Service. Form 8332 (Rev. December 2025) – Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent
Three conditions apply. The child received over half of their support from one or both parents. The child was in the custody of one or both parents for more than half the year. And the custodial parent signs Form 8332 or a substantially similar written declaration.8Internal Revenue Service. Form 8332 (Rev. December 2025) – Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent The noncustodial parent attaches a copy of the signed form to their return for each year they claim the credit.
A revocation of the release doesn’t take effect until the tax year after the noncustodial parent receives notice. Revoke it in 2025 and the earliest it applies is the 2026 tax year.8Internal Revenue Service. Form 8332 (Rev. December 2025) – Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent Keep copies of everything; this is a common source of disputes.
How to Claim the Credits
Both credits are calculated on Schedule 8812, attached to Form 1040.9Internal Revenue Service. Instructions for Schedule 8812 (Form 1040) The schedule walks through the number of qualifying children, the non-refundable calculation, the income phase-out, and then the refundable Additional Child Tax Credit. You need each qualifying child’s Social Security number and each other dependent’s SSN, ITIN, or ATIN entered in the dependents section of Form 1040.
E-filed returns are generally processed within 21 days.10Internal Revenue Service. Processing Status for Tax Forms Paper returns take six weeks or more.11Internal Revenue Service. Refunds If your return claims the Additional Child Tax Credit, expect a longer wait: federal law bars the IRS from issuing any refund that includes the ACTC (or the Earned Income Tax Credit) before mid-February, even if you filed on January 1. The hold covers the entire refund, not just the credit portion.12Internal Revenue Service. When to Expect Your Refund if You Claimed the Earned Income Tax Credit or Additional Child Tax Credit Filing early still puts you in the queue for the moment the hold lifts, but don’t plan a January budget around an ACTC refund.
Penalties for Claiming a Child You Shouldn’t
Claiming a child or dependent you’re not entitled to carries consequences beyond repaying the credit. The severity depends on whether the IRS treats the error as careless, reckless, or fraudulent.
- An accuracy-related penalty of 20 percent of the underpayment applies where the IRS finds negligence or disregard of the rules.13Office of the Law Revision Counsel. 26 US Code 6662 – Imposition of Accuracy-Related Penalty on Underpayments
- A two-year ban on claiming the Child Tax Credit, Additional Child Tax Credit, and Credit for Other Dependents applies where the IRS finds reckless or intentional disregard of the rules.14Internal Revenue Service. What to Do if We Deny Your Claim for a Credit
- A ten-year ban applies where fraud is involved.15Internal Revenue Service. Understanding Your CP79B Notice
After any ban ends, you have to file Form 8862 with your next return to prove eligibility before the IRS will allow the credits again.16Internal Revenue Service. About Form 8862, Information to Claim Certain Credits After Disallowance The same form is required any time the IRS has previously reduced or denied your claim for reasons other than a math error. Two parents claiming the same child is one of the most common triggers for an audit, especially among separated couples who haven’t sorted out who signs Form 8332.