The Child Tax Credit (CTC) and the Additional Child Tax Credit (ACTC) are two valuable tax benefits designed to help families with children reduce their federal income tax burden. These credits not only ease the financial cost of raising children but can also significantly increase the amount of a family’s tax refund. Understanding how these credits work, who qualifies, and how to claim them is essential for maximizing your tax savings.
What Is the Child Tax Credit (CTC)?
The Child Tax Credit is a partially refundable credit that provides financial relief to parents and guardians for each qualifying child under age 17. It directly reduces your tax liability — meaning it lowers the amount of tax you owe to the IRS dollar for dollar.
As of the 2025 tax year (for returns filed in 2026), the Child Tax Credit is:
- Up to $2,000 per qualifying child under age 17
- Partially refundable: Up to $1,500 may be refunded if the credit exceeds your tax liability (this portion is the ACTC)
- Phases out for higher-income taxpayers: Begins phasing out at $200,000 for single filers and $400,000 for joint filers
Eligibility Requirements for the Child Tax Credit
To claim the Child Tax Credit, each child must meet all of the following criteria:
- Age: Must be under age 17 at the end of the tax year
- Relationship: Must be your son, daughter, stepchild, foster child, sibling, stepsibling, or a descendant of any of these
- Support: Must not have provided more than half of their own financial support during the year
- Residency: Must have lived with you for more than half the year
- Citizenship: Must be a U.S. citizen, U.S. national, or U.S. resident alien with a valid Social Security number
- Claimed as Dependent: Must be listed as your dependent on your tax return
How to Claim the Child Tax Credit
You claim the Child Tax Credit using IRS Form 1040. List each qualifying child on your return and provide their Social Security numbers. The credit will be calculated and reported on Schedule 8812 (Credits for Qualifying Children and Other Dependents).
The IRS then applies the credit against your total tax liability. If the amount of the credit exceeds your tax owed, you may be eligible for the Additional Child Tax Credit.
What Is the Additional Child Tax Credit (ACTC)?
The ACTC is the refundable portion of the Child Tax Credit. If the full $2,000 credit per child is not used to offset your tax liability, you may be able to receive up to $1,500 per child as a tax refund through the ACTC.
Eligibility for the ACTC
To qualify for the Additional Child Tax Credit, you must:
- Have earned income of more than $2,500
- Have a tax liability that is less than your total Child Tax Credit amount
- Meet all the other criteria for claiming the CTC
The amount of your ACTC refund depends on your earned income and number of qualifying children. The credit is phased in at 15% of your earned income above $2,500, up to the $1,500 maximum per child.
Differences Between CTC and ACTC
| Feature | Child Tax Credit (CTC) | Additional Child Tax Credit (ACTC) |
|---|---|---|
| Refundable? | Partially (up to $1,500) | Yes (for unused CTC amount) |
| Max Per Child | $2,000 | $1,500 |
| Income Requirement | None | Earned income over $2,500 |
| Filed On | Form 1040, Schedule 8812 | Form 1040, Schedule 8812 |
Phase-Out of the Credit
The Child Tax Credit begins to phase out for high-income earners. The phase-out threshold is:
- $200,000 for Single or Head of Household
- $400,000 for Married Filing Jointly
The credit is reduced by $50 for each $1,000 of income above these thresholds.
Impact on Your Refund
Because the CTC directly reduces your tax bill and the ACTC offers a refund even when no taxes are owed, these credits can substantially increase your refund. Families with low-to-moderate income can benefit the most, especially when combined with other credits like the Earned Income Tax Credit (EITC).
Tips for Maximizing the Child Tax Credit
- Ensure dependents have valid Social Security numbers issued by the due date of your return.
- Review your earned income — the ACTC is tied to earned income above $2,500, so increasing earnings may increase your refundable credit.
- Check your filing status — Head of Household and Married Filing Jointly often yield better tax outcomes for families.
- Use Schedule 8812 properly — make sure it is accurately filled out to avoid delays in processing.
Common Mistakes to Avoid
- Claiming children who do not meet the age, residency, or dependency requirements
- Forgetting to include Social Security numbers
- Failing to file Schedule 8812
- Using incorrect earned income for ACTC calculation
Conclusion
The Child Tax Credit and Additional Child Tax Credit are powerful tools that can significantly reduce your tax bill and increase your refund. Families with children under 17 should carefully review their eligibility and ensure accurate reporting to take full advantage of these benefits.
If you’re unsure how to claim these credits or calculate your eligible amount, consider using tax preparation software or consulting a tax professional. Proper planning and understanding of these credits can make a meaningful difference in your financial outcome during tax season.
