A dollar-for-dollar cut in your tax
The Child Tax Credit is the largest tax break most families claim, and it's a credit, not a deduction, meaning it reduces your tax bill directly rather than reducing the income you're taxed on. A $2,200 credit saves you $2,200, whereas a $2,200 deduction might save around $480 in the 22% bracket. For 2026 the credit is $2,200 per qualifying child under 17, made permanent and inflation-indexed by the 2025 OBBBA legislation.
The seven tests for a qualifying child
All of these must be true for 2026:
- Age: under 17 at the end of the year.
- Relationship: your child, stepchild, foster child, sibling, or a descendant of any of them.
- Dependency: you claim them as a dependent.
- Residency: they lived with you more than half the year.
- Support: they didn't provide more than half of their own support.
- Citizenship: U.S. citizen, national, or resident alien.
- Identification: a valid Social Security number issued before the return's due date.
The income phase-out
The credit reaches well into the middle class before tapering. It begins to shrink once modified AGI exceeds $200,000 ($400,000 married filing jointly), falling by $50 for each $1,000 (or part thereof) above the threshold. A joint-filing couple with two children and $430,000 of MAGI is $30,000 over, so they lose 30 × $50 = $1,500, reducing a $4,400 credit to $2,900.
The refundable portion
Up to $1,700 per child is refundable through the Additional Child Tax Credit, meaning you can receive it even if your tax is already zero. The refundable amount is limited by an earned-income formula (15% of earned income above $2,500), which is why the credit rewards working families. Note that a refund including this credit is held by the IRS until mid-February under the PATH Act.
Claiming it, and planning with it
You claim the credit on Form 1040 using Schedule 8812; tax software handles it once you enter your dependents. Because the credit reduces your annual tax, you can also account for it on your W-4 (Step 3) so less is withheld during the year rather than waiting for a refund, though if your income is near the phase-out, be conservative. Full detail is in our Child Tax Credit guide, and you may also qualify for the EITC.