Child Tax Credit

The child tax credit is a credit against income tax allowed for each qualifying child of the taxpayer. It is nonrefundable, so on its own it reduces a tax liability and does not create a refund, and the refundable half of the arrangement is a separate computation covered in additional child tax credit.

Two numbers do most of the work: the per-child amount, and the income at which the credit starts to shrink. Legislation in 2025 raised the first of those and made the enhanced version of the whole section permanent, and it left the second where it already stood.

What the Statute Allows

The base rule is one sentence and it carries a condition that is easy to read past. There shall be allowed as a credit against the tax imposed by this chapter for the taxable year, with respect to each qualifying child of the taxpayer for which the taxpayer is allowed a deduction under section 151, an amount equal to $1,000 (26 U.S.C. 24(a)).

That figure is not the operative one. In the case of a taxable year beginning after December 31, 2017, the section is applied as provided in paragraphs (2) through (7) of subsection (h), and paragraph (2) applies subsection (a) by substituting $2,200 for $1,000 (26 U.S.C. 24(h)(1), 26 U.S.C. 24(h)(2)).

The IRS states the same result plainly: the child tax credit is worth up to $2,200 per qualifying child (IRS, Child Tax Credit).

The credit is described by the IRS as a nonrefundable credit that allows people with a qualifying child to reduce their tax liability (IRS, Child Tax Credit). Nonrefundable is a position rather than a policy, and what it means arithmetically is set out in tax credit.

What Changed in 2025

Several parts of the section moved at once, which is why a return prepared from memory of the earlier rules goes wrong in more than one place.

Section 70104 of Public Law 119-21, enacted July 4, 2025, struck the phrase “, and before January 1, 2026” from subsection (h)(1), so the enhanced version of the section no longer has an end date written into it, and it made the matching change to the subsection heading. The same section substituted $2,200 for $2,000 in subsection (h)(2), and amended three further pieces generally: paragraph (h)(5), the maximum amount of the refundable credit, paragraph (h)(7), the social security number rule, and subsection (i), the inflation adjustments. Those amendments apply to taxable years beginning after December 31, 2024 (26 U.S.C. 24, amendment notes).

The IRS describes the same act in its own words. Section 70104 of the OBBBA amends section 24 to make the increased and expanded child tax credit under section 24(h), which were effective for taxable years beginning after December 31, 2017, and before January 1, 2026, permanent. It also amends section 24(h)(2) to provide that the maximum amount of child tax credit is $2,200 for any taxable year beginning in 2025, and that amount is adjusted for inflation for taxable years beginning after December 31, 2025 (IRS, Rev. Proc. 2025-32, section 2, paragraph .03).

Indexing did not move the figure for the following year. For taxable years beginning in 2026, the maximum amount of the credit allowed under section 24(a) is $2,200, and the amount used in section 24(d)(1)(A) to determine the portion that may be refundable is $1,700 (IRS, Rev. Proc. 2025-32, section 4, paragraph .05).

The mechanism for that is in the statute, and it runs on a base year rather than on the year of enactment. For a taxable year beginning after 2025, the $2,200 amount in subsection (h)(2) is increased by that dollar amount multiplied by the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting 2024 for 2016 in subparagraph (A)(ii) of that provision (26 U.S.C. 24(i)(2)). Any increase under that subsection that is not a multiple of $100 is then rounded to the next lowest multiple of $100 (26 U.S.C. 24(i)(3)). Rounding down to a multiple of $100 is the mechanism by which an adjustment smaller than that step can leave the headline figure where it was.

The Phase-Out Is a Staircase, Not a Cliff

This is the part most often described loosely, and the statute is precise about it.

The amount of the credit allowable under subsection (a) is reduced, but not below zero, by $50 for each $1,000, or fraction thereof, by which the taxpayer’s modified adjusted gross income exceeds the threshold amount. For that purpose, modified adjusted gross income means adjusted gross income increased by any amount excluded from gross income under section 911, 931, or 933 (26 U.S.C. 24(b)(1)).

Three details in that sentence change answers. The reduction stops at zero rather than turning negative. A partial $1,000 counts as a whole one, which is what “or fraction thereof” does. And the measure is not plain AGI: the foreign earned income, possessions and Puerto Rico exclusions are added back, so a client with excluded foreign earnings can be phased out at an AGI that looks well clear of the line. The base itself is defined in modified adjusted gross income.

The threshold has two versions and only one of them is live. Subsection (b)(2) sets it at $110,000 on a joint return, $75,000 for an individual who is not married, and $55,000 for a married individual filing a separate return, with marital status determined under section 7703 (26 U.S.C. 24(b)(2)). In lieu of the amount determined under subsection (b)(2), the threshold amount is $400,000 in the case of a joint return, and $200,000 in any other case (26 U.S.C. 24(h)(3)).

Note the shape of the live version. It has one figure for joint returns and one for everything else, so single, head of household and married filing separately all sit at the same line, where the base rule in subsection (b)(2) gives an unmarried individual and a married individual filing separately two different figures.

The IRS puts the same test as a full-credit condition: a filer qualifies for the full amount for each qualifying child if all eligibility factors are met and annual income is not more than $200,000, or $400,000 filing a joint return, and parents and guardians with higher incomes may be eligible to claim a partial credit (IRS, Child Tax Credit).

Worked through on a joint return with two qualifying children:

Qualifying children under age 17                              2
Credit before the limitation, 2 x $2,200                 $4,400
Modified adjusted gross income                         $412,400
Threshold amount, joint return                         $400,000

Excess over the threshold                               $12,400
Whole and part $1,000 increments in that excess              13
Reduction, 13 x $50                                        $650
Credit after the limitation                              $3,750

Amounts per 26 U.S.C. 24(h)(2), 26 U.S.C. 24(h)(3) and 26 U.S.C. 24(b)(1). The last three lines are the subtraction, not separate statutory amounts. The excess over the threshold covers twelve whole increments and part of a further one, and because the statute counts a fraction of an increment as a whole one, the reduction is figured on thirteen increments rather than on twelve (26 U.S.C. 24(b)(1)).

Which Children Count

The section defines its own qualifying child by borrowing one definition and adding an age. The term qualifying child means a qualifying child of the taxpayer, as defined in section 152(c), who has not attained age 17 (26 U.S.C. 24(c)(1)). The five tests inside that borrowed definition are set out in dependents.

A second paragraph narrows it again. The term qualifying child does not include any individual who would not be a dependent if subparagraph (A) of section 152(b)(3) were applied without regard to all that follows “resident of the United States” (26 U.S.C. 24(c)(2)), and the same exception is written into the increase for other dependents (26 U.S.C. 24(h)(4)(B)).

The IRS lists the working version for the 2025 tax year. A qualifying child generally must be under 17 at the end of the tax year, be the filer’s son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of one of these, not provide more than half of their own support for the tax year, have lived with the filer for more than half the tax year, be claimed as a dependent on the return, not file a joint return for the year, or file one only to claim a refund of taxes withheld or estimated taxes, and be a U.S. citizen, U.S. National or a U.S. resident alien (IRS, Child Tax Credit).

A dependent who fails the age test is not simply lost. The credit determined under subsection (a), after the substitution of the larger amount, is increased by $500 for each dependent of the taxpayer as defined in section 152 other than a qualifying child described in subsection (c) (26 U.S.C. 24(h)(4)(A)), and a qualifying child denied the credit by reason of the social security number rule in paragraph (7) is treated as a dependent to whom that increase applies (26 U.S.C. 24(h)(4)(C)). That increase is worked through in credit for other dependents.

The Identification Rules Are Two Rules, Not One

Both the child and the filer have to be identified, and each has its own timing test.

No credit is allowed with respect to any qualifying child unless the taxpayer includes the name and taxpayer identification number of that child on the return for the taxable year, and that taxpayer identification number was issued on or before the due date for filing the return. Separately, no credit is allowed at all if the taxpayer’s own taxpayer identification number was issued after the due date for filing the return for the taxable year (26 U.S.C. 24(e)).

The amended social security number rule is stricter than the identification rule it sits beside. No credit is allowed with respect to any qualifying child unless the taxpayer includes on the return both the taxpayer’s social security number, or on a joint return the social security number of at least 1 spouse, and the social security number of that qualifying child. For this purpose a social security number means one issued by the Social Security Administration, but only if it is issued to a citizen of the United States or pursuant to subclause (I), or that portion of subclause (III) that relates to subclause (I), of section 205(c)(2)(B)(i) of the Social Security Act, and issued before the due date for the return (26 U.S.C. 24(h)(7)).

The IRS renders the same requirement in intake language. To qualify, the filer, or the filer’s spouse if married filing jointly, and each qualifying child must have a social security number that is valid for employment in the United States and issued before the due date of the tax return, including extensions (IRS, Child Tax Credit).

Two further limits sit on the section as a whole. Except in the case of a taxable year closed by reason of the death of the taxpayer, no credit is allowable for a taxable year covering a period of less than 12 months (26 U.S.C. 24(f)). And a prior bad claim closes the door for a fixed period: 10 taxable years after the most recent year for which there was a final determination that the claim was due to fraud, and 2 taxable years after the most recent year for which there was a final determination that the claim was due to reckless or intentional disregard of rules and regulations, but not due to fraud (26 U.S.C. 24(g)(1)).

What the Credit Costs a Preparer Who Gets It Wrong

The child tax credit is one of the four items inside the paid preparer due diligence penalty, and the penalty is per failure rather than per return.

In the case of any failure relating to a return or claim for refund filed in 2027, failure to be diligent in determining eligibility for head of household filing status, child tax credit, American Opportunity tax credit, and earned income credit under section 6695(g) carries $665 per failure, with no maximum (IRS, Rev. Proc. 2025-32, section 4, paragraph .54).

What that duty actually demands, and the form that records it, are set out in american opportunity tax credit.

Common Questions

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