Raising kids is expensive, and every dollar helps. That’s why the federal government – and 15 states – offer a child tax credit to help ease some of the costs for parents.¹
Tax credits reduce your tax liability, or what you owe, on a dollar-for-dollar basis. They’re different from tax deductions, which lower your taxable income for the year.²
Child tax credit programs exist to help families minimize some of their tax burden and keep more of their hard-earned dollars. If you have kids or plan to start a family someday, it pays to know how this valuable tax benefit works.
What is the child tax credit?
The federal Child Tax Credit (CTC) is a tax credit for households with one or more eligible children. There are two parts: the standard child tax credit and the Additional Child Tax Credit (ACTC).³
You and your child must meet certain requirements for you to be able to claim the credit. Eligibility is based on your child’s age and relationship to you, your annual income, and other factors.³
Child tax credit vs. additional child tax credit
When you hear tax terms like “child tax credit” and “additional child tax credit” it can get a little confusing. So here’s a quick primer to help you make sense of them.
- The standard child tax credit is available for each qualifying child you have and can reduce your tax bill down to zero.
- The additional child tax credit is also available for each qualifying child and it lets you get some of the child tax credit paid back to you in a refund.³
What this means: if your child tax credit amount is more than the amount of tax you owe or your taxes are reduced to $0, you could claim the additional child tax credit. It would then be added to your refund.
How does the child tax credit work?
Child tax credits work by allowing you to offset some of what you owe in taxes.
For example, if you owe $1,500 to the IRS but qualify for a $1,000 child tax credit, that brings your tax bill down to $500 instead. If you qualify for the maximum child tax credit, you might end up owing nothing at all for the tax year.
The child tax credit shouldn’t be confused with other tax breaks for families, like the Child and Dependent Care Credit. That credit is designed to help working parents offset some of the cost of childcare.⁴
How much are the child tax payments?
What is the child tax credit worth? For tax year 2024, the child tax credit is worth up to $2,000 per child. That’s the maximum limit for families whose modified adjusted gross income (MAGI) is $200,000 or less, or $400,000 or less if you’re married and file a joint return.³
The additional child tax credit, meanwhile, is worth up to $1,600.³
Child tax credit for families making over $200,000
Earning more money can disqualify you from claiming certain tax breaks, or limit the amount that you can claim.
Higher-income families can still qualify for the child tax credit but the amount is different. Your credit is reduced by $50 for each $1,000 of income above the allowed limit. It eventually phases out to $0 for higher-income earners.⁵
Could the child tax credit amount change?
The child tax credit is subject to change, just like any other provision of the tax code. For instance, the IRS could:
- Increase or decrease the maximum credit amounts
- Change the maximum income thresholds for claiming the credit
- Redefine who counts as a qualifying child
It’s possible that the credit could increase in the future. However, there are no plans to do so on the horizon for now.
Who qualifies for the child tax credit?
The IRS has clear guidelines for who qualifies for child tax credit benefits.³ To claim this credit, you must be within the modified adjusted gross income limits for your tax filing status and have a dependent child who:
- Is under age 17 at the end of the year
- Is your son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of one of those
- Has a valid Social Security number
- Provides no more than half of their own financial support during the year
- Has lived with you for more than half the year
- Can be claimed as a dependent on your tax return
- Doesn’t file a joint tax return with a spouse or files it only to claim a refund of withheld income tax or estimated taxes paid
- Is a U.S. citizen, U.S. national, or permanent resident
Those are a lot of boxes to check but it’s worth finding out if you qualify. The IRS offers an interactive tool that you can use to determine if you’re eligible for the child tax credit.
How can you claim this credit?
If you’re eligible for the child tax credit you can claim it on your Form 1040 when you file your taxes. You’ll need to fill out Schedule 8812 to claim the child tax credit and the additional child tax credit.⁶
Online tax software can guide you through whether you qualify for the credit or not. You’ll have to answer some questions about your dependent child and if you qualify, the program will calculate your credit amount. If you hire someone to prepare your taxes, they should ask you the same questions to make sure you can claim every credit you’re eligible for.
You’ll claim the credit for the current tax year when you file. So if you’re filing taxes in April 2025, you’d claim the credit on your 2024 tax return.
Child tax credits can save families big
Claiming tax credits (or deductions) can help you keep more of the money you earn and that’s priceless when you have kids. Any money you don’t have to pay in taxes is money that you can use to grow your emergency fund, build college savings for your kids, or pay down debt. Those are all things that can help you get ahead financially.
Whether you claim federal or state tax credits or not, it’s always important to ensure that you get your return in on time. Learn what happens if you file your taxes late.