Quick Breakdown of the Child Tax Credit
Tax season is approaching, which means it’s time to consider your tax strategy. And an essential piece of that is finding ways to reduce your taxable income and tax bill with tax credits and deductions, such as the Child Tax Credit.
As a reminder, a tax credit reduces your tax bill on a dollar-for-dollar basis and could entirely eliminate your tax bill. A tax deduction, like the home office deduction for small business owners, lowers your taxable income.
The Child Tax Credit is one of the most popular for those with child dependents. Check out our simple outline of everything you need to know, from credit amount and income threshold to how to claim it.
What is the Child Tax Credit?
The Child Tax Credit is a non-refundable tax credit available for people with a dependent under the age of 17. This means while it reduces your tax liability and can even negate any taxes you owe, you won’t receive a refund if the amount is higher than your tax bill. However, you might qualify for a partial refund through the Additional Child Tax Credit (which we’ll explain below).
As with any tax credit and deduction, you must meet specific qualifications and income thresholds to receive this tax benefit.
How Much is the Child Tax Credit & Income Threshold?
The maximum Child Tax Credit amount is $2,000 per qualifying dependent child for taxpayers with a modified adjusted gross income (MAGI) of:
$400,000 or less for married taxpayers filing jointly
$200,000 or less for single filers/married taxpayers filing separately
For example, if you owe $4,000 in taxes and are eligible for the Child Tax Credit, your tax bill would be $2,000. The tax credit is reduced by $50 for every $1,000 over the thresholds noted above.
Who is Eligible for the Child Tax Credit?
As long as you have a Social Security number valid for employment in the United States, you may claim the Child Tax Credit if your dependent:
Is below age 17 at the end of the 2024 tax year
Is your son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendent of one of the above (e.g., grandchild, niece, or nephew)
Provides a maximum of half of their own financial support during the year
Has lived with you for more than half the year (although there are some exceptions)
Is appropriately claimed as your dependent on your tax return
Does not file a joint tax return, unless they need to claim a refund of withheld income taxes or estimated taxes paid
Is a U.S. citizen, U.S. national, or U.S. resident alien with a valid Social Security number
You can claim the Child Tax Credit on Form 1040 or Form 1040-SR if you qualify.
What is the Additional Child Tax Credit?
The standard Child Tax Credit is nonrefundable, so you cannot receive a refund for any excess from the credit. But the Additional Child Tax Credit is another credit you can claim to receive a partial refund of up to $1,700 per child.
You must meet the criteria above to qualify for the Additional Child Tax Credit. Additionally:
You must either have a minimum earned income of $2,500 OR have three or more qualifying dependents. (Earned income is usually defined as coming from jobs or self-employment and doesn’t include passive income like unemployment compensation, retirement, or IRA distributions.)
You or your spouse (if filing jointly) cannot file Form 2555 or Form 2555-EZ to exclude foreign-earned income.
So, if you only owe $1,000 and qualify for the $2,000 Child Tax Credit, you can claim the Additional Child Tax Credit to receive the remaining $1,000 as a refund.
You can find out if you’re eligible by completing the Child Tax Credit Worksheet on Form 1040 along with Schedule 8812, which will tell you your tax credit amount and how much of the partial refund you qualify for. The 2024 filing deadline was April 15, 2025, but those who filed an extension have until October 15, 2025.
Happening Now: Potential Changes to the Child Tax Credit
You might’ve heard of President Trump’s One Big Beautiful Bill, which just gained approval from a key congressional committee on May 18. While the legislation still has a long way to go, if passed, it could impact the Child Tax Credit by:
Increasing the full Child Tax Credit amount to $2,500 per child through 2028
Decreasing the credit to $2,000 after 2028 but indexing it for inflation
Requiring all applicants to have a Social Security number to qualify—meaning for married joint filers, both parents must have a valid SSN
Limiting the refundable portion (a.k.a. Additional Child Tax Credit) to $1,400 per qualifying child
The future of the bill may be uncertain, but we’ll strive to keep you updated on tax legislation updates that could affect you—so be sure to check back here for updates!
Are you looking for an experienced tax professional to help you navigate the many tax credits and deductions available and determine which you qualify for? JLS Accounting’s experienced team will guide the way and help you get through a smooth tax season! Book an intro call today for help catching up on your 2024 taxes or a jump start on 2025!
Updated May 2025
Originally published October 2023