The Child Tax Credit (CTC) is one of the most widely claimed credits on U.S. tax returns. For millions of families, it directly reduces the amount of tax owed — and for lower-income households, a portion of it can even come back as a refund. Here is how it works in 2025.
The Basic Credit: $2,000 Per Child
For 2025, the Child Tax Credit is worth up to $2,000 per qualifying child. This is a credit — not a deduction — meaning it reduces your tax bill dollar-for-dollar. If you owe $4,500 in federal income tax and have two qualifying children, the credit wipes out $4,000 of that liability.
Who Is a Qualifying Child?
To claim the credit, each child must meet all of the following:
- Age: Under 17 at the end of the tax year
- Relationship: Your child, stepchild, foster child, sibling, half-sibling, or a descendant of any of these
- Residency: Must have lived with you for more than half the year
- Support: Did not provide more than half of their own support during the year
- Citizenship: Must be a U.S. citizen, national, or resident alien
- Social Security Number: Must have a valid SSN (not just an ITIN)
Income Phase-Out Thresholds
The full $2,000 credit is available to taxpayers below certain income levels. The credit begins to phase out at:
- $200,000 for single filers, heads of household, and qualifying surviving spouses
- $400,000 for married filing jointly
The credit reduces by $50 for every $1,000 of income above these thresholds. A married couple earning $410,000 would see the credit reduced by $500 per child — from $2,000 to $1,500.
The Additional Child Tax Credit (Refundable Portion)
The Child Tax Credit is generally non-refundable — meaning it can reduce your tax to zero but you do not get the excess back as a refund. However, the Additional Child Tax Credit (ACTC) allows lower- and middle-income families to receive up to $1,700 per child as a refund even if they owe little or no tax.
To calculate the refundable amount, you receive 15% of your earned income above $2,500. For example:
- Earned income: $30,000
- Amount above threshold: $27,500
- 15% of $27,500 = $4,125
- If you have two children, you could receive up to $3,400 (2 × $1,700) as a refundable credit — capped at the lesser of this calculation or the unused CTC amount
Other Dependents: The $500 Credit
If you have a dependent who does not qualify for the full Child Tax Credit — such as a child age 17 or older, or an elderly parent you support — you may be able to claim a $500 nonrefundable credit for other dependents. This credit is subject to the same income phase-out as the CTC.
Claiming the Credit
Report qualifying children on Schedule 8812, which calculates both the Child Tax Credit and the Additional Child Tax Credit. Tax software handles this automatically once you enter dependent information.
You can only claim the credit for a child on one return. If you are divorced or separated, the custodial parent generally has the right to claim the credit, though it can be transferred to the non-custodial parent using Form 8332.
What the Credit Does Not Cover
The Child Tax Credit is separate from other child-related tax benefits:
- Child and Dependent Care Credit — for childcare expenses while you work
- Earned Income Tax Credit — a separate credit based on earned income with different qualifying rules
- Dependent exemptions — eliminated under the Tax Cuts and Jobs Act of 2017; the CTC partially replaced them
Planning Considerations
If your income is near the phase-out threshold, contributing to a traditional 401(k) or IRA can reduce your AGI and potentially preserve part or all of your Child Tax Credit. Even a few hundred dollars of additional retirement savings could save you more in credits than the contribution itself.
Bottom Line
The Child Tax Credit is worth up to $2,000 per qualifying child and reduces your federal tax bill directly. Families with children under 17, valid SSNs, and income below $200,000 (single) or $400,000 (joint) should claim this credit in full. If you owe little or no tax, check whether you qualify for the refundable Additional Child Tax Credit as well.