The Child Tax Credit Explained: Who Qualifies and How to Claim It

The Child Tax Credit is one of the most valuable tax benefits available to families with children. It can reduce your tax bill significantly, and for some families it can increase their tax refund. Here’s a plain-English overview of how it works. Tax rules and credit amounts change, so always check irs.gov for the current year’s details.

What a tax credit is

A tax credit directly reduces the amount of tax you owe, dollar for dollar. That makes credits more valuable than deductions, which reduce your taxable income rather than your tax bill. For example, a $1,000 tax credit reduces your tax bill by $1,000, while a $1,000 deduction reduces it by $1,000 multiplied by your tax rate.

The Child Tax Credit provides a credit for each qualifying child in your family. Families with several children can receive a credit for each one.

Who qualifies

To claim the Child Tax Credit, your child generally must meet several requirements.

Age: The child must be under age 17 at the end of the tax year.

Relationship: The child must be your son, daughter, stepchild, eligible foster child, brother, sister, half-sibling, stepsibling or a descendant of any of them, such as a grandchild, niece or nephew.

Residency: The child must have lived with you for more than half of the year, with some exceptions for temporary absences, such as school, and special rules for children of divorced or separated parents.

Support: The child must not have provided more than half of their own financial support during the year.

Social Security number: The child must have a valid Social Security number issued before the due date of your tax return. Requirements for the taxpayer’s identification may also apply.

Dependent status: You must claim the child as your dependent on your tax return.

Citizenship: The child must be a U.S. citizen, U.S. national or U.S. resident alien.

Income limits

The credit phases out at higher incomes. Once your modified adjusted gross income exceeds a certain threshold, which is higher for married couples filing jointly than for other filers, the credit is gradually reduced. Most families with moderate incomes receive the full credit. Check irs.gov for the current thresholds.

The refundable portion

Part of the Child Tax Credit may be refundable, meaning some families can receive it as part of their tax refund even if they owe little or no tax. This portion is often called the additional child tax credit.

Refundability is especially valuable for lower-income working families, who may not owe enough tax to benefit fully from a nonrefundable credit. To receive the refundable portion, families generally need earned income above a certain level, and the refundable amount is capped. Check irs.gov for current rules.

How to claim the credit

You claim the Child Tax Credit on your federal tax return, Form 1040, usually with Schedule 8812, which is used to calculate the credit and any refundable portion. You’ll need each child’s name, Social Security number and other information.

Tax software walks you through the process, asking questions to determine eligibility and calculating the credit automatically. Free tax help programs, such as Volunteer Income Tax Assistance, known as VITA, and Tax Counseling for the Elderly, offer free tax preparation for qualifying taxpayers. IRS Free File offers free online filing options for eligible taxpayers.

Special situations

Divorced or separated parents should know that generally only one parent can claim the Child Tax Credit for a child in a given year, typically the custodial parent, meaning the parent the child lived with for the greater part of the year. In some cases, the custodial parent can release the claim to the noncustodial parent using IRS Form 8332. Coordinating with your co-parent can prevent problems.

If your child doesn’t qualify for the Child Tax Credit, such as because they’re 17 or older, you may qualify for the credit for other dependents, which provides a smaller nonrefundable credit.

Other family tax benefits

Families may qualify for several other tax benefits. The credit for other dependents applies to dependents who don’t qualify for the Child Tax Credit, such as older children or elderly parents. The Child and Dependent Care Credit helps offset the cost of childcare so you can work or look for work. The Earned Income Tax Credit benefits low- to moderate-income working families and can be worth a substantial amount for families with children. Education credits, such as the American Opportunity Tax Credit, help with college costs.

Head of household filing status, available to qualifying unmarried taxpayers, offers a larger standard deduction and more favorable tax brackets than single filing status.

Get help

If you’re unsure what you qualify for, free IRS-certified volunteers at VITA sites can help prepare your return and make sure you claim the credits you’re eligible for. The IRS website also offers an interactive tool to help determine eligibility for the Child Tax Credit. Claiming all the credits you qualify for can make a meaningful difference in your family’s finances.