One of the most valuable and accessible incentives in the American tax system is the child tax credit. Child tax credits help parents and caregivers reduce their annual tax burden and increase their refunds.
Many households with children can save thousands of dollars through the child tax credit. However, it’s important to be aware of the 2025 child tax credit update since Congress passed the “One Big Beautiful Bill.” These changes could result in higher child tax credit amounts for some families, plus inflation-based adjustments.
In this Western Shamrock article, we explore child tax credit eligibility, the child tax credit income limit, and other tax factors to know if you have children.
What Is the Child Tax Credit?
The child tax credit provides financial relief to parents and caregivers who are responsible for dependent children. Based on the 2025 child tax credit update, the incentive amount is up to $2,200 per child. The child tax credit age for qualification is under 17.
There are two versions of this credit: the Child Tax Credit and the Additional Child Tax Credit. The basic child tax credit reduces the amount of federal taxes you owe. Meanwhile, the additional child tax credit has a refundable portion, which allows families with little or no tax liability to still receive money back as a refund.
Child Tax Credit Amounts by Year
The child tax credit has a well-established history in the American tax system. It was introduced in 1997 at $400 per child, and the refundability expansion was added in 2009. In 2017, the Tax Cuts and Jobs Act increased the credit to $2,000 per child. The American Rescue Plan temporarily expanded the credit in 2021, providing advance monthly payments and higher amounts for young children.
Most recently, in 2025, the One Big Beautiful Bill increased the credit to $2,200 per child, which is inflation-adjusted for future years. The refundable portion of the child tax credit is up to $1,700 per child.
Who Qualifies for the Child Tax Credit?
Child tax credit eligibility depends on specific criteria for families to claim the credit in 2025. For example, a child must be under age 17 at the end of the tax year. An eligible child can be your biological child, foster child, sibling, stepchild, half-sibling, grandchild, niece, nephew, or other descendant.
To claim child tax credit eligibility, you must be able to claim a child as a dependent. In most cases, the child must have lived with you for over half the year. However, there are some exceptions to this rule. Eligible children must not be providing over half of their own support, and they must be U.S. citizens, nationals, or resident aliens.
There is also a child tax credit income limit, with a phase-out that begins at $200,000 for someone filing taxes as single or head of household. The child tax credit income limit is $400,000 for married couples filing jointly. As of 2025, both the tax filer and the child must have work-eligible Social Security numbers. If filing jointly, it’s only required for one spouse to have an SSN.
How Income Limits Affect Your Credit
If you exceed the child tax credit income limit, your credit is reduced by $50 for every $1,000 you earn above the limit. The child tax credit begins to phase out at $200,000 for a single filer and at $400,000 for joint filers.
Let’s take, for example, a married couple collectively earning $410,000 who have two children. They earn $10,000 over the child tax credit income limit. Therefore, their credit is reduced by $500, so they receive a credit of $3,900 instead of the full $4,400.
How to Claim the Child Tax Credit
Even with the new child tax credit update, the process of claiming your credit is the same. You claim a child tax credit when filing your federal tax return. Pay close attention to Schedule 8812, which covers credits for qualifying children and other dependents.
You can use tax software or IRS Free File for assistance with child tax credits. You can also hire professional help for tax filing to alleviate your burden and ensure your documents are accurately filed.
If the IRS previously denied your child tax credit, you can file Form 8862 to be eligible again.
When Will You Receive Your Refund?
The amount of time it takes to receive your refund depends on the current processing times at the IRS. However, the IRS is not legally allowed to issue refunds for returns claiming the child tax credit before mid-February. This law applies to tax filers, even if you file your taxes as early as possible.
To track your refund after you file your return, check the IRS’s “Where My Refund?” online tool.
Common Errors & Consequences
To collect your full child tax credit as quickly as possible, it’s crucial to avoid filing mistakes. For example, one common error families make includes claiming a child who doesn’t meet the SSN, residency, or support requirements. Other common errors are filing taxes without proper documentation about a child and incorrectly calculating income phase-outs.
If you incorrectly claim a child tax credit, you may need to repay it to the IRS and face penalties of up to 20%. Before attempting to claim a child tax credit again in the future, you’ll need to use Form 8862.
Additional & Alternative Credits
Now that you understand the answer to “How does child tax credit work?”, what are some other credits that may help your family?
The Additional Child Tax Credit is the refundable portion of the standard child tax credit, now $1,700 as of 2025. There’s the Other Dependent Credit, which provides up to $500 for dependents who don’t qualify for the standard child tax credit. This incentive is often helpful for tax filers who have older children or elderly parents they take care of.
Meanwhile, there are state-level child tax credits that apply to residents of certain states, such as Colorado, California, and New York. Inquire with your tax preparer if your state has its own child-related credits in addition to the federal ones.
We Can Help You with Child Tax Credits
After reading this article, we hope that you have a better understanding of how child tax credits work and how they apply to your family situation.
In addition to our flexible and versatile installment loans, we also offer fast and accurate tax preparation services in our many local branches. We can help you navigate the child tax credit income limit and child tax credit eligibility to maximize your refund and collect what you are legally owed as a parent or caregiver.
Please visit a branch near you to discuss your taxes and take the stress out of tax season. We look forward to helping you access this valuable tax credit, enabling you to provide the best care for your children.
