The IRS Child Tax Credit (CTC) is one of the most important federal tax benefits available to families in the United States. Designed to ease the financial burden of raising children, the credit directly reduces a taxpayer’s federal income tax liability and, in many cases, provides a refundable payment to qualifying households.
Since its creation under the Taxpayer Relief Act of 1997, the Child Tax Credit has undergone several legislative changes, most notably the Tax Cuts and Jobs Act (TCJA) in 2017, the American Rescue Plan Act (ARPA) in 2021, and permanent adjustments under the 2025 reconciliation law (P.L. 119-21). These reforms expanded eligibility, increased benefit amounts, and extended refundability to more low- and moderate-income families.
How Much Is the Child Tax Credit Worth in 2025?
For tax year 2025, the maximum Child Tax Credit is $2,200 per qualifying child under age 17. This is a temporary increase from the standard $2,000 credit, which will return in 2029 unless further legislation extends the higher amount.
- Refundable Portion (ACTC): Families with little or no income tax liability may qualify for the Additional Child Tax Credit (ACTC). This refundable benefit is worth up to $1,700 per child, calculated as 15% of earned income above $2,500.
- Example: A family with two children and $30,000 in earned income could be eligible for a refund of up to $3,400, depending on their tax liability.
Income Phaseout Rules
The Child Tax Credit begins to phase out once a household’s income exceeds:
- $200,000 for single filers and heads of household
- $400,000 for married couples filing jointly
The credit is reduced by $50 for every $1,000 of income above these thresholds. For example, a married couple with two children will lose the full benefit if their income exceeds approximately $488,000.
Who Qualifies as a Child for the Credit?
The IRS requires that each child claimed for the CTC meet specific tests:
- Age Test – Must be under 17 at the end of the tax year.
- Relationship Test – Must be the taxpayer’s child, stepchild, foster child, sibling, grandchild, niece, or nephew.
- Residency Test – Must have lived with the taxpayer for more than half of the year.
- Support Test – The child cannot provide more than half of their own support.
- Citizenship Test – Must be a U.S. citizen, national, or resident.
- SSN Requirement – Both the child and the taxpayer (or spouse, if filing jointly) must have a valid, work-authorized Social Security Number (SSN) issued before the return’s due date.
The 2021 Expansion Under ARPA
In 2021, the American Rescue Plan Act temporarily expanded the credit:
- $3,600 per child under age 6
- $3,000 per child ages 6–17
- Fully refundable, regardless of income
- Advance monthly payments distributed to families
While this expansion lasted only one year, it set a precedent for broader refundability and coverage. Current law has returned the credit to $2,200 per child (with refundability capped at $1,700), but advocates continue to push for reforms closer to the 2021 structure.
The $500 Credit for Other Dependents
Not all dependents qualify for the CTC. To offset the loss of personal exemptions, Congress created a $500 nonrefundable credit for dependents who do not meet the “qualifying child” definition—such as older children, college students under age 24, or elderly parents.
Child Tax Credit in Numbers
Data from the IRS and the Tax Policy Center (TPC) illustrate the significance of the program:
- The total dollar value of the CTC rose from $28 billion in 1998 to $118 billion in 2022.
- In 2022, taxpayers earning between $100,000 and $200,000 received the largest average credit—over $3,000 per household.
- Families with income under $20,000 typically received less than $1,000, largely due to refundability limits.
- About 90% of families with children claimed the credit in 2022, although only half of low-income households under $10,000 benefited, since earnings below $2,500 do not qualify for the ACTC.
Compliance and Fraud Prevention
The IRS has strict rules to prevent misuse of the Child Tax Credit:
- Fraudulent claims result in a 10-year ban on claiming the credit.
- Reckless or intentional disregard of rules results in a two-year ban.
Families must maintain accurate records of eligibility, including residency and dependency documentation, to substantiate their claims.
Key Takeaways
- The IRS Child Tax Credit in 2025 is worth up to $2,200 per child under 17.
- Low- and middle-income families may receive up to $1,700 per child as a refundable payment.
- The credit phases out for incomes above $200,000 (single) and $400,000 (married joint).
- A valid Social Security Number is required for both the child and the taxpayer.
- Policy debates continue, with some lawmakers advocating for restoring the expanded 2021 benefits.
Sources:
- https://www.irs.gov/pub/irs-pdf/p972.pdf
- https://www.congress.gov/bill/105th-congress/house-bill/2014
- https://www.congress.gov/bill/115th-congress/house-bill/1
- https://www.congress.gov/bill/117th-congress/house-bill/1319
- https://www.congress.gov
- https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit-eitc
- https://www.taxpolicycenter.org/briefing-book/what-child-tax
