Learn About the Child Tax Credit

What Is the Child Tax Credit?

The Child Tax Credit is a federal tax benefit that reduces the amount of income tax a household owes to the federal government. It is one of the largest tax benefits available to families with children. Rather than receiving money directly from the government, the credit lowers your tax bill dollar for dollar. For example, if you owe $3,000 in federal income tax and have a Child Tax Credit of $2,000, you would owe only $1,000 after applying the credit.

As of 2024, the standard Child Tax Credit provides up to $2,000 per child under age 17. This amount has been consistent since 2018, when the Tax Cuts and Jobs Act increased it from $1,000. The credit is refundable to a certain extent, which means that if the credit amount exceeds the taxes you owe, you may receive the difference as a refund. The refundable portion is called the Additional Child Tax Credit, and it can be worth up to $1,700 per child in 2024, though this amount adjusts annually for inflation.

The Child Tax Credit exists because policymakers recognize that raising children involves significant expenses. These costs include housing, food, education, healthcare, childcare, and other necessities. The credit acknowledges that families with children often have less disposable income available for taxes compared to households without children at the same income level. Over 35 million families used the Child Tax Credit in 2022, receiving an average credit of around $1,800 per family.

The credit has been modified several times over the past two decades. In 2021 and 2022, as part of the American Rescue Plan, the credit was expanded to $3,600 per child under age 6 and $3,000 per child ages 6 through 17, and it became fully refundable. These expanded amounts were temporary and expired at the end of 2022, returning the credit to its previous structure.

Practical Takeaway: Understanding that the Child Tax Credit reduces what you owe in taxes is the foundation for learning how it might affect your household. The credit is substantial—worth up to $2,000 per child—and for lower-income families, part of it can result in a refund even if you owe no income tax.

Who May Be Able to Claim the Child Tax Credit

To claim the Child Tax Credit, you must meet several conditions related to the child, your relationship to the child, and your own tax situation. The child must be a U.S. citizen, national, or resident alien with a valid Social Security number. They must also be under age 17 at the end of the tax year in which you are claiming the credit. This means a child who turns 17 during the year is not covered by the credit for that tax year.

You must have a qualifying relationship to the child. This includes biological children, stepchildren, adopted children, and children placed in your home for adoption. It also includes siblings, half-siblings, and descendants of these relatives, such as grandchildren, nieces, or nephews, as long as they live with you as members of your household for more than half the year. Foster children also count if they are placed in your home by an authorized placement agency or court order.

Your income level affects whether you can claim the full credit. In 2024, the credit begins to phase out for single filers with a modified adjusted gross income (MAGI) above $400,000 and for married couples filing jointly with MAGI above $800,000. For each $1,000 of income above these thresholds, the credit is reduced by $50. This means high-income households may receive a smaller credit or no credit at all. However, the vast majority of families fall well below these income limits.

You cannot claim the Child Tax Credit if someone else is claiming you as a dependent on their tax return. For example, if you are a teenager being claimed as a dependent by your parent, you cannot claim your own children (if applicable) as dependents on your return. Additionally, both parents cannot claim the same child. When parents are divorced or separated, specific rules determine which parent may claim the credit, typically based on custody arrangements.

Your filing status matters as well. You must file a tax return to claim the credit, and your filing status must be something other than "Married Filing Separately" to receive the full benefit. The IRS requires that you and any spouse file jointly to claim the credit.

Practical Takeaway: Before considering the Child Tax Credit, verify that each child meets the age and relationship requirements and that you are the only person claiming them on a tax return. Income thresholds are high enough that most working families can claim the credit.

How Income Affects the Child Tax Credit

Your income level determines not only whether you can claim the Child Tax Credit but also how much of it you receive. The IRS uses Modified Adjusted Gross Income (MAGI) to determine this amount. For most families, MAGI is the same as adjusted gross income (AGI), which appears on your tax return. However, MAGI can include certain types of income that are otherwise excluded from AGI, such as foreign earned income or excluded income of residents of Guam, American Samoa, or Puerto Rico.

The phase-out thresholds where the credit begins to reduce are $400,000 for single filers, $400,000 for heads of household, and $800,000 for married couples filing jointly in 2024. These thresholds are adjusted annually for inflation. Once your MAGI exceeds these amounts, the credit decreases by $50 for each $1,000 (or fraction thereof) of income above the threshold. For example, if you are married filing jointly with MAGI of $810,000, you are $10,000 over the threshold. This means your credit would be reduced by $500 (10 × $50).

For lower-income families, the refundable portion of the credit becomes important. If your tax liability is less than the total Child Tax Credit you have, the Additional Child Tax Credit (the refundable portion) may allow you to receive the excess as a refund. In 2024, up to $1,700 of the credit per child is refundable. This means a family with three children under 17 could have a total credit of $6,000, but if they owe only $2,500 in federal income tax, they might receive a refund of $1,500 after the credit reduces their tax to zero and the refundable portion provides additional money back.

The relationship between income and the credit can be complex for households with significant changes in income year to year. Freelancers, self-employed individuals, and those with variable income may find their credit amount changes from year to year. It is important to accurately report your income when filing your tax return to ensure the correct credit amount.

Practical Takeaway: Higher income reduces your Child Tax Credit, but most working families remain well below the phase-out threshold. Lower-income families benefit from the refundable portion of the credit, which can result in a refund even if no income tax is owed.

Other Tax Benefits for Children and Families

The Child Tax Credit is one of several tax benefits available to families with children, though it is typically the largest. Understanding the other benefits available can help you plan your taxes and maximize what you might receive. These benefits operate differently and may have different income limits, so it is important to understand how each works.

The Earned Income Tax Credit (EITC) is another major benefit for lower-income families. Unlike the Child Tax Credit, the EITC is based primarily on your earned income from working, not on the number of children you have. However, families with children receive a much larger EITC than individuals without children. In 2024, a married couple filing jointly with earned income between approximately $26,000 and $60,000 with three or more qualifying children might receive an EITC of up to $3,995. Like the Child Tax Credit, the EITC is refundable, meaning you can receive money even if you owe no income tax. Some families are able to claim both the Child Tax Credit and the EITC.

The Child and Dependent Care Credit helps families who pay for childcare so they can work. This credit covers up to $3,000 in childcare expenses per year for one child or dependent. The credit is worth 20% to 35% of