The Child Tax Credit goes to people who claim dependent children on their tax return, but your income determines how much you receive

The Child Tax Credit is a dollar-for-dollar reduction in the federal income tax you owe, worth up to $2,000 per child under age 17. You claim it on your tax return by listing each may have access to child's Social Security number. The IRS does not send you money automatically — you must file a return to receive it, even if you earned too little to owe tax.

Income is the main gate. If your income exceeds a threshold that depends on your filing status, the credit begins to shrink. Once it shrinks to zero, you receive nothing. This is different from a deduction, which reduces the income you are taxed on. A credit directly reduces your tax bill, which is why it matters more.

Key Takeaways

  • You must claim the child as a dependent on your tax return, which requires their Social Security number and proof they lived with you for more than half the year.
  • The child must be under age 17 on December 31 of the tax year, a U.S. citizen, national, or resident alien, and claimed by only one person.
  • Your modified adjusted gross income (MAGI) determines whether the full $2,000 credit applies or whether it phases out, with phase-out thresholds of $400,000 for married filing jointly and $200,000 for single filers.
  • If your income is below the phase-out threshold, you receive the full credit; if above it, the credit reduces by $50 for each $1,000 (or fraction thereof) of income over the threshold.
  • You can receive part of the credit as a refund (the refundable portion) even if you owe no tax, but only if you have earned income and meet other conditions.

The child must meet four conditions

First, the child must be your dependent. This means you claim them on your tax return, they lived with you for more than half the year (not counting temporary absences like school), and you paid more than half their living costs. A child of yours, a stepchild, a foster child, a sibling, or a descendant of any of these can may have access to if they meet the other rules.

Second, the child must be under age 17 on December 31 of the tax year. A child who turns 17 on December 31 does not may have access to for that year. A child who turns 17 on January 1 of the next year does may have access to.

Third, the child must be a U.S. citizen, national, or resident alien with a valid Social Security number. You must enter this number on your return. If the child does not have a number, you cannot claim the credit.

Fourth, only one person can claim the child. If two parents are divorced, the parent with custody for the longer part of the year normally claims the child, unless they sign a form releasing the credit to the other parent. If you and another adult both claim the same child, the IRS will disallow one of the claims and may assess penalties.

How income phases out the credit

The credit is worth $2,000 per child if your modified adjusted gross income (MAGI) is below the phase-out threshold. MAGI is usually your adjusted gross income (AGI) from your tax return, with a few adjustments added back — for most people, it is the same as AGI.

The phase-out threshold depends on your filing status. For married filing jointly, the threshold is $400,000. For single, head of household, or may have access to widow(er), it is $200,000. For married filing separately, it is $100,000.

If your MAGI exceeds the threshold, the credit shrinks by $50 for every $1,000 of income over the limit (or any fraction of $1,000). For example, if you are single with MAGI of $201,500 and one child, you are $1,500 over the $200,000 threshold. The credit reduces by $50 × 2 (rounding up the fraction) = $100, leaving you with $1,900.

The credit cannot go below zero. Once the phase-out calculation produces zero, you receive nothing, even if you have more income.

The refundable portion: getting money back

Part of the Child Tax Credit is refundable, meaning you can receive it as a refund even if you owe no federal income tax. This is called the Additional Child Tax Credit or the refundable Child Tax Credit.

To receive the refundable portion, you must have earned income — wages, self-employment income, or certain other income from work. Investment income, Social Security, or unemployment benefits do not count. The refundable amount is limited to 15 percent of your earned income over $2,500, up to $1,700 per child (as of 2023; this amount may change by year).

For example, if you earned $20,000 and have one child, your refundable credit is 15 percent of ($20,000 − $2,500) = 15 percent of $17,500 = $2,625. But the limit is $1,700, so you receive $1,700 as a refund. The remaining $300 of your $2,000 credit reduces your tax bill.

If you earned less than $2,500, you have no refundable portion. If you earned $2,500 to $14,166, the refundable amount is less than $1,700. Above $14,166, you reach the $1,700 cap.

What happens if two parents claim the same child

If you and another person both claim the same child on separate returns, the IRS will reject one claim. Typically, the IRS keeps the claim filed first and disallows the second. You may then owe back tax plus interest and penalties.

If you and the other parent are divorced or separated, the parent with custody for the longer part of the year has the right to claim the child, unless they sign Form 8332 (Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent) giving the credit to the other parent. The other parent must attach a copy of this form to their return.

If you are unsure whether you have the right to claim a child, contact the other parent or a tax professional before filing. Filing a return that claims a child you do not have the right to claim can trigger an audit.

Special situations: adoption, foster care, and multiple children

If you adopted a child during the year, you can claim the credit for that child if they lived with you for the rest of the year and meet the other rules. The child does not have to be a U.S. citizen at the time of adoption, but must be a U.S. citizen, national, or resident alien by the end of the tax year.

If you are a foster parent, you can claim the credit for a foster child if they lived with you for the entire year and you have a valid Social Security number for them. The child does not have to be related to you by blood or adoption.

If you have multiple children, you claim the credit for each one separately. A family with three may have access to children can receive up to $6,000 in credit (before phase-out). Each child must have their own Social Security number and meet all four conditions.

How to claim the credit on your return

You claim the Child Tax Credit on Form 1040 (U.S. Individual Income Tax Return) or Form 1040-SR (for people age 65 and older). You list each child's name and Social Security number in the dependent section of the form.

If you use tax software, it will ask you about each dependent and calculate the credit automatically. If you file by hand, you must complete the credit calculation worksheet in the Form 1040 instructions and enter the result on the form.

You do not need to file a separate form to claim the credit. The credit is built into the main return. However, if you want to claim the refundable portion and your income is very low, you may need to file even if you would not otherwise owe tax, because filing is how you receive the refund.

Frequently Asked Questions

Can I claim the credit for a grandchild or niece I support?

Yes, if the child lived with you for more than half the year, you paid more than half their living costs, and they are under 17 and a U.S. citizen or resident alien. The child does not have to be your biological child. You must claim them as a dependent on your return and have their Social Security number.

What if my child was born on December 31?

You can claim the credit for that year. The rule is that the child must be under age 17 on December 31, which includes a child born that day. A child born on January 1 of the next year does not may have access to for the current year.

Do I lose the entire credit if my income is slightly over the threshold?

No. The credit phases out gradually — it reduces by $50 for each $1,000 of income over the threshold. If you are $1,000 over, you lose $50. You only lose the entire credit if your income is so high that the phase-out calculation brings it to zero.

Can I claim the credit if I do not file a tax return?

No. You must file a return to claim the credit, even if you earned too little to owe tax. If you have earned income and want the refundable portion, filing is especially important because that is how you receive the refund.

What if the child's other parent claims them first?

If you file a return claiming the same child, the IRS will reject your claim and may assess penalties. If you and the other parent are divorced, the custodial parent has the right to claim the child unless they sign Form 8332 releasing it. Coordinate with the other parent before filing to avoid this problem.