The Child Tax Credit is the major mechanism of financial support for families in the United States, intended to offset some of the expenses for raising children. Going into the 2025 tax year, some significant changes are about to hit regarding how much families can claim and what portion of that credit will be refundable. It may be important to know what these changes will be to possibly affect how one might plan out the coming years financially.
Overview of the Child Tax Credit
The Child Tax Credit allows taxpayers a credit for each qualifying child under the age of 17. The Child Tax Credit will be $2,000 per qualifying child for the 2025 tax year. This amount is the same as prior years but may be limited depending on income.
The full credit is available only if the taxpayer’s Modified Adjusted Gross Income (MAGI) is below $400,000 for married couples filing jointly and $200,000 for all other filers. It phases down by $50 for every $1,000 a taxpayer’s MAGI exceeds the above-stated threshold amount until the credit is fully phased out.
Refundable portion of the CTC
But perhaps more importantly, the CTC has a refundable portion: the Additional Child Tax Credit, or ACTC. For 2025, the refundable amount shall increase to $1,700 per qualifying child. This reflects an increase from $1,600 in 2024 and provides additional financial relief to families. You can also learn how to, Can I request the ACTC if I do not qualify for the IRS Child Tax Credit (CTC)?
This refundable portion is especially important to low- and moderate-income families, since many of these working families may not have enough taxes owed to qualify for the full amount of the nonrefundable credit. In order to be eligible for the ACTC, the taxpayers must have earned income above $2,500. The IRS calculates the refundable amount as 15% of the earned income in excess of this amount. In effect, a taxpayer with three or more qualified dependants may, if such will maximize their refund, consider a more complicated calculation.
How to claim the Child Tax Credit
The CTC can be claimed on federal tax returns using Form 1040 or 1040-SR. Furthermore, to appropriately determine their eligibility and calculate the credit correctly, they are also required to attach a Schedule 8812 (“Credits for Qualifying Children and Other Dependents”). This schedule will help them identify how much they might have available to claim from the CTC and how much of it may be refunded through the ACTC.
It cannot be stressed enough that the taxpayers maintain good books of records as to dependents and income levels during the course of a year, so that they may claim the maximum benefit available to them. You can go through this article for further clarity, Child Tax Credit (CTC) 2024: How much is it, requirements, who qualifies and how to claim it to the IRS
Future implications: 2026 deductions
For the year 2026, the taxpayers should be informed that the confirmed changes for 2025 may or may not be altered for the following years. However, it is expected that with the same base continuing, there will be continuous upward modifications in both components of the CTC because of the inflation adjustments that are expected to occur.
Furthermore, the taxpayer needs to make sure what effect these credits would have on the other tax benefits available to the taxpayer in 2026. Generally, keeping up with the possible changes of the tax law will be important as possible legislative changes may greatly affect total tax liability.
Read more: Is there an IRS $8700 Stimulus Check on the way? What we know so far
Read more: Is there an age limit on claiming my child as a dependent?
