The following Child Tax Credit overview covers updated details on the Child Tax Credit, Additional Child Tax Credit, Adoption Tax Credit, and Child & Dependent Care Tax Credit for the 2024 and 2025 tax years. There were notable and temporary pandemic-related changes to the Child Tax Credit in the 2021 tax year with the American Rescue Plan Act, with a fairly significant Child Tax Credit expansion and the creation of a Child Tax Credit portal for taxpayers. For 2024 and 2025, those temporary pandemic increases revert to the prior Child Tax Credit levels highlighted below that were part of the Tax Cut & Jobs Act (tax reform), with the refundable (“Additional”) portion of the credit having increased with prior inflation adjustments. The Child Tax Credit amounts and terms are scheduled to expire at the end of 2025, when the credit amount will drop to a maximum of $1,000 per eligible child.
What is the Child Tax Credit?
The Child Tax Credit is a significant tax credit for those with qualified dependent children under age 17 (more on qualifications in a bit). A tax credit is a subtraction from actual taxes owed, dollar-for-dollar, which is much more valuable than a deduction (which is a subtraction from your taxable income, not a subtraction of taxes owed). The Child Tax Credit can reduce your tax obligation down to zero, with the potential to be partially refundable if you are eligible for the Additional Child Tax Credit, which means you could get a portion of the credit refunded to you.
What is the “Additional Child Tax Credit”?
The “Additional Child Tax Credit” is not well named, so you’d be best served to ignore the name. The Additional Child Tax Credit is the refundable portion of the Child Tax Credit, which you may be eligible to receive if the amount of the credit is greater than the total balance of income taxes you owe. In order to figure out if you are eligible for the Additional Child Tax Credit, you would fill out IRS Schedule 8812 or have tax software (suggestions below) automatically do this for you.
2024 Child Tax Credit Amount
The 2024 Child Tax Credit is $2,000 per qualifying child and is refundable up to $1,700 (a $100 increase over the prior year) if eligible for the Additional Child Tax Credit. The Child Tax Credit is subject to the income phaseouts noted below.
2024 Additional Child Tax Credit Amount
The 2024 Additional Child Tax Credit (amount of the Child Tax Credit that may be refunded) is up to a maximum of $1,700 if taxes owed reach that amount (and less if they do not). For example, if you’re eligible for a $2,000 Child Tax Credit but the total amount of your tax balance owed is $250, you may be eligible for up to a $1,450 refundable Additional Child Tax Credit ($1,700 – $250). The refundable amount is equal to 15% of earned income above $2,500 (see my post on the earned income tax credit, which can be claimed separately as well).
2024 Child Tax Credit Income Level Phaseouts
The 2024 Child Tax Credit income level phaseouts are at the levels that were in place in 2020. The amount of the Child Tax Credit begins to phase out at $200,000 of modified adjusted gross income, or $400,000 for married couples filing jointly. The Child Tax Credit phaseout rate is $50 for each additional $1,000 (or fraction thereof) above the aforementioned income thresholds.
2025 Child Tax Credit Amount
The 2025 Child Tax Credit is $2,000 per qualifying child and is refundable up to $1,700 (unchanged versus 2024) if eligible for the Additional Child Tax Credit. The Child Tax Credit is subject to the income phaseouts noted below.
2025 Additional Child Tax Credit Amount
The 2025 Additional Child Tax Credit (amount of the Child Tax Credit that may be refunded) is up to a maximum of $1,700 if taxes owed reach that amount (and less if they do not). For example, if you’re eligible for a $2,000 Child Tax Credit but the total amount of your tax balance owed is $250, you may be eligible for up to a $1,450 refundable Additional Child Tax Credit ($1,700 – $250). The refundable amount is equal to 15% of earned income above $2,500.
2025 Child Tax Credit Income Level Phaseouts
The 2025 Child Tax Credit income level phaseouts are at the levels that were in place in 2020. The amount of the Child Tax Credit begins to phase out at $200,000 of modified adjusted gross income, or $400,000 for married couples filing jointly. The Child Tax Credit phaseout rate is $50 for each additional $1,000 (or fraction thereof) above the aforementioned income thresholds.
How Do I Claim the Child Tax Credit?
If you have a qualifying child (see the next section for details), you will need to file a tax return in order to claim the refundable Additional Child Tax Credit, even if your income level falls below the minimum income to file taxes threshold.
In addition to filling out the appropriate lines in your 1040 form, you will need to submit IRS Schedule 8812 to claim the Child Tax Credit and Additional Child Tax Credit.
Claiming the Child Tax Credit (particularly the refundable portion) is not easy, but the best tax software and cheapest e-file options will help you determine eligibility and fully take advantage of the Child Tax Credit through the software questionnaire and resulting paperwork.
What is a “Qualified Child” for the Child Tax Credit?
A qualifying child for this credit is someone who meets the qualifying criteria of six tests: age, relationship, support, dependent, citizenship, and residence.
- Age Test: To qualify, a child must have been under age 17 – age 16 or younger – at the end of the year.
- Relationship Test: To claim a child for purposes of the Child Tax Credit, they must either be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister or a descendant of any of these individuals (includes your grandchild, niece, or nephew). An adopted child is always treated as your own child. An adopted child includes a child lawfully placed with you for legal adoption.
- Support Test: In order to claim a child for this credit, the child must not have provided more than half of their own support for the year.
- Dependent Test: You must claim the child as a dependent and that you provided at least half the child’s support during the tax year.
- Citizenship Test: To meet the citizenship test, the child must be a U.S. citizen, U.S. national, or U.S. resident alien.
- Residence Test: The child must have lived with you for more than half of the tax year with some exceptions,
- A child who was born (or died) during the tax year is considered to have lived with you for the entire year.
- Temporary absences by you or the child for special circumstances, such as school, vacation, business, medical care, military services or detention in a juvenile facility, are counted as time the child lived with you.
- There are also some exceptions to the residency test for children of divorced or separated parents. For details, see the instructions for Form 1040.
- Social Security Test: Beginning with tax year 2018, your child must have a Social Security Number issued by the Social Security Administration before the due date of your tax return (including extensions) to be claimed as a qualifying child for the Child Tax Credit or Additional Child Tax Credit. Children with an ITIN can’t be claimed for either credit. If your child’s immigration status has changed so that your child is now a U.S. citizen or permanent resident but the child’s social security card still has the words “Not valid for employment” on it, ask the SSA for a new social security card without those words. If your child doesn’t have a valid SSN, your child may still qualify you for the Credit for Other Dependents. If your dependent child lived with you in the United States and has an ITIN, but not an SSN, issued by the due date of your return (including extensions), you may be able to claim the new Credit for Other Dependents for that child.
There is a qualifying child questionnaire on the IRS website to help you determine eligibility, if you are unsure or want to double-check.
Can you Claim a Child Tax Credit in the Year the Child was Born?
After looking at the ‘residence test’ above, I was left wondering whether or not you could claim the Child Tax Credit in the year the child was born if the child was born in the second half of the year. Publication 972 lists this as one of the exceptions in which you can claim the credit:
A child is considered to have lived with you for more than half of (the year) if the child was born or died in (the year) and your home was this child’s home for more than half the time he or she was alive.
What is the Adoption Tax Credit?
For those who adopt a child, there is an Adoption Tax Credit for:
- Reasonable and necessary adoption fees,
- Court costs and attorney fees,
- Traveling expenses (including amounts spent for meals and lodging while away from home), and
- Other expenses that are directly related to and for the principal purpose of the legal adoption of an eligible child.
The amount of the credit is annually adjusted for inflation and subject to income limits (listed below). To claim the Adoption Tax Credit, you’ll need to complete IRS Form 8839, Qualified Adoption Expenses. More info. on the Adoption Tax Credit can be found here and here.
Adoption Tax Credit Maximum Amount (2024 and 2025)
The maximum Adoption Tax Credit amount that can be claimed is:
- 2024: $16,810
- 2025: $17,280
The Adoption Tax Credit amount is adjusted for inflation annually.
Adoption Tax Credit Income Phaseouts (2024 and 2025)
- 2024: The available adoption credit begins to phase out for taxpayers with modified adjusted gross income in excess of $252,150 and is completely phased out for taxpayers with modified adjusted gross income of $292,150 or more.
- 2025: The available adoption credit begins to phase out for taxpayers with modified adjusted gross income in excess of $259,190 and is completely phased out for taxpayers with modified adjusted gross income of $299,190 or more.
The income phaseout levels are adjusted for inflation annually.
Tax Credits for Child Care (The Child & Dependent Care Credit)
In addition to the Child Tax Credit, there are also tax credits for child care, if you’ve paid for child care for a qualified child. The child care credit is referred to as the Child and Dependent Care Credit, and it can be up to a maximum of $3,000 (for one qualifying individual) or $6,000 (for two or more qualifying individuals). In order to claim the credit, you will need to file form 2441.
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