The Child Tax Credit: Everything You Need to Know

If you’re like me and have kids, you’re probably looking for any way to save money you can. Between groceries, day care services, school supplies and sports gear, every little bit of savings counts.

Fortunately, tax credits like the child tax credit (CTC) can help offset those costs and put more money back in your pocket. But first, what exactly is the child tax credit, and do you qualify? Let’s get into it.

What Is the Child Tax Credit?

The child tax credit lowers your tax bill based on how many children you have. Basically, it’s a tax break for parents. (And let’s be real—we could all use a break. Right, Mom and Dad?) 

The government created this tax credit to help with the costs of raising kids—because raising kids isn’t cheap!

What Is the Child Tax Credit Amount for 2024 and 2025?

For the 2024 and 2025 tax years, you can get a maximum tax credit of $2,000 for each qualifying child under age 17—although there is an income limit. The credit’s value decreases for married couples earning over $400,000 and individuals earning over $200,000.

Now, there are two types of tax credits: refundable and nonrefundable. Both types lower your tax bill. But if a refundable credit is more than your total tax bill, you get the difference back as a refund—even if your tax bill is zero!

That’s important to know because the child tax credit is (drum roll, please) a refundable tax credit. Woo-hoo! Now, the IRS does limit how much of a refund you can get back for each qualifying child, with the maximum being $1,700. This refundable portion is called the additional child tax credit (ACTC). But hey, that’s still an amazing deal for you.

Looking ahead a bit, the child tax credit is set to return to the pre-pandemic amount of $1,000 for the 2026 tax year (which will affect your tax bill when you file in 2027).³ But there’s some chatter in Congress about extending the current credit amount, so sit tight and cross your fingers!

Who Is Eligible for the Child Tax Credit?

Does your family qualify for the child tax credit? You and your dependent need to meet a few requirements to be eligible. Here’s what you need to know:⁴

1. The child must be under age 17 at the end of the year.
2. The child must be related to you in one of the following ways: your son, daughter, eligible foster child, stepchild, brother, sister, stepsibling, half sibling or a descendent of one of these (like a niece or nephew).
3. The child must be a U.S. citizen, a U.S. national or a U.S. resident alien.
4. The child has to be claimed as a dependent on your tax return. So, if you share custody of your children, the child tax credit will go to the parent who’s claiming the kids for the 2024 tax year. You can’t both claim the same child. If you do, you might have to pay a penalty to Uncle Sam and could even be banned from claiming the CTC for two years (ten years for intentional fraud!).⁵ That could be a costly mistake, so make sure you have everything figured out between the two of you.
5. The child can’t file a joint return for the same tax year. But they can file a return to claim a refund of their withheld income taxes or estimated taxes paid.
6. The child must have lived with you for more than half the year.
7. The child must have provided no more than half of their own financial support during the year. For example, let’s say your teen made money with a summer job. They’ll only qualify if they made less than half of what their needs cost.

These are the CTC qualifications for your child, but here’s the deal with income requirements: If you’re married filing jointly and your income is $400,000 or less ($200,000 or less for all other filing statuses), then you qualify for the full amount. Anything above those thresholds and the credit amount starts phasing out.⁶

How Does the Child Tax Credit Work?

Tax credits—like the child tax credit—are awesome because they cut your tax bill dollar for dollar. In case you’re wondering, that’s different from a tax deduction, which lowers your tax bill by reducing your taxable income.

Don’t settle for tax software with hidden fees or agendas. Use one that’s on your side—Ramsey SmartTax.

Let’s see the child tax credit in action. Let’s say you’re married and filing jointly and you owe $8,000 in taxes this year. If you’re like me and you have three kids who are all under 17—how would the CTC affect you tax bill?

Assuming your income is under the $400,000 threshold for married filing jointly and each child qualifies, your child tax credit is $6,000. That means you cut your tax bill big time—down to about $2,000. It’s that easy!

How Do I Claim the Child Tax Credit?

If your child meets the qualifications I mentioned earlier, claiming this credit is a piece of cake. Just enter your children and other dependents on your Form 1040 or 1040-SR, then fill out and attach a Schedule 8812 (Credits for Qualifying Children and Other Dependents).

This Schedule 8812 form will help you calculate your CTC amount. And it’ll also help you figure out if you’ll get back any part of the credit as a refund.

Remember, the child tax credit is worth $2,000 per child, but it’s only partially refundable. That means if you don’t owe taxes, you can only receive up to $1,700 of the credit (per child) as a refund.⁷ 

But here’s the deal: If you keep getting big refunds every year because of the child tax credit, that isn’t really a good thing. That’s actually your money—the government is just giving it back to you after you loaned it to them all year.

Instead, you need to adjust your tax withholding on your paycheck so you bring that money home every month instead of sending it to Uncle Sam. Then you can use it during the year for all those kid-related expenses you’re juggling!

Claim the Child Tax Credit With Confidence

All right, y’all, there’s your quick rundown of the child tax credit. As you can see, taking advantage of tax credits like this can make a huge difference when tax season rolls around. So, just like your kids, make sure you do your homework—it could help you keep more money in your pocket.

Frequently Asked Questions