The OBBBA raised the child tax credit from $2,000 to $2,500 per qualifying child. Here is who qualifies, how the phase-out works at $400K MFJ and $200K single, and what to do on your 2025 and 2026 returns.
The One Big Beautiful Bill Act (OBBBA) raised the federal child tax credit from $2,000 to $2,500 per qualifying child, starting with 2025 tax returns filed in 2026. The phase-out begins at $400,000 MAGI for married filing jointly and $200,000 for single filers. A portion of the credit is refundable through the Additional Child Tax Credit (ACTC), so some families may receive a refund even with low or zero tax liability.
The One Big Beautiful Bill Act (H.R. 1, 119th Congress), signed into law on July 4, 2025, increased the federal child tax credit from $2,000 to $2,500 per qualifying child. The increase applies to tax years beginning in 2025 — meaning your 2025 return (filed in 2026) and your current 2026 return are both affected.
Per the IRS overview of all OBBBA tax provisions, the qualifying child requirements, phase-out thresholds, and refundability structure carry forward from the Tax Cuts and Jobs Act framework. The credit amount itself is what changed.
For a family with two qualifying children, the credit now reaches $5,000 ($2,500 × 2), up from $4,000 under the TCJA. Because the credit reduces your federal tax owed dollar-for-dollar, it is more valuable than an equivalent deduction. A $2,500 credit saves exactly $2,500 in taxes; a $2,500 deduction at the 22% bracket saves only $550.
The OBBBA's other individual tax changes — the no-tax-on-tips deduction, the enhanced standard deduction, and the new $6,000 senior deduction — are covered in separate guides. The full summary of all individual tax changes is at One Big Beautiful Bill: Key Tax Changes for Individual Filers in 2026.
To claim the $2,500 credit for a given child, the child must meet all seven requirements set out in IRS Publication 501:
1. Age: The child must be under age 17 — meaning 16 or younger — on December 31 of the tax year. A child who turns 17 at any point during the year does not qualify for that year. 2. Relationship: Son, daughter, stepchild, foster child, sibling, step-sibling, half-sibling, or a descendant of any of those (grandchild, niece, nephew). 3. Residence: The child must have lived with you for more than half the tax year. Temporary absences for school, medical care, or similar reasons count as time at home. 4. Support: The child cannot have provided more than half of their own financial support during the year. 5. Dependency: You must be eligible to claim the child as a dependent on your return. The child generally cannot file a joint return with a spouse unless only to claim a refund of withheld taxes. 6. Citizenship: The child must be a U.S. citizen, U.S. national, or U.S. resident alien. 7. Social Security number: The child must have a valid SSN issued by the Social Security Administration by the tax return due date, including extensions.
All seven conditions must be met. A child who fails any one of them does not qualify for that year's credit.
Only one parent can claim the child tax credit for a given child in a given year. The general rule: whichever parent the child lives with for more nights during the year has the right to claim the credit. Parents can agree in writing to alternate years or transfer the claim to the non-custodial parent using IRS Form 8332. The credit amount is the same regardless of which parent claims it.
The credit phases down above certain income levels. The phase-out uses your modified adjusted gross income (MAGI) — for most filers, MAGI equals AGI as reported on Form 1040.
| Filing Status | Phase-Out Begins | Reduction Per $1,000 | |---|---|---| | Married filing jointly | $400,000 MAGI | $50 per $1,000 above threshold | | Single / Head of Household | $200,000 MAGI | $50 per $1,000 above threshold | | Married filing separately | $200,000 MAGI | $50 per $1,000 above threshold |
The credit reduces by $50 for each $1,000 (or fraction thereof) of MAGI above the applicable threshold:
Full phase-out occurs when the reduction equals the total available credit for your number of qualifying children. For a single filer with one qualifying child, complete phase-out occurs around $250,000 MAGI. Phase-out thresholds are unchanged from the TCJA — only the credit amount per child increased.
The child tax credit has two layers:
Non-refundable portion: Reduces your federal income tax liability to zero, but not below. If your total federal tax bill is $1,500 and you have one qualifying child, the credit eliminates your federal tax balance.
Refundable portion — the Additional Child Tax Credit (ACTC): If the credit exceeds your tax liability, some families can receive the excess as a refund. The ACTC is calculated on IRS Schedule 8812 (Credits for Qualifying Children and Other Dependents). Eligibility for the ACTC generally requires earned income — wages, salaries, or net self-employment income. Families with no earned income typically do not qualify for the refundable component.
No new forms or separate filings are required because of the OBBBA — the process is the same as prior years:
1. Form 1040, Dependents section: List each qualifying child with their name, SSN, and your relationship to them. Check the box indicating the child qualifies for the child tax credit. 2. Schedule 8812: Computes the non-refundable credit and, if applicable, the refundable ACTC. The form walks through the phase-out calculation automatically. 3. Line 19 (Form 1040): Non-refundable CTC flows here and reduces your tax liability directly. 4. Line 28 (Form 1040): Refundable ACTC flows here if applicable.
If you used tax software in 2025, the software will apply the new $2,500 per-child amount automatically for 2025 returns filed now and for 2026 returns filed next year. No action is required beyond having accurate records of each qualifying child.
The child tax credit is separate from two other credits parents frequently encounter:
| Credit | What It Covers | Age Limit | Can Claim With CTC? | |---|---|---|---| | Child Tax Credit (CTC) | Child's existence as your dependent | Under 17 | — | | Child and Dependent Care Credit | Childcare costs paid so you can work | Under 13 (any age if disabled) | Yes — separate calculation | | Earned Income Tax Credit (EITC) | Income support for low-to-moderate earners with children | Under 19 (or 24 if a student) | Yes — separate calculation |
All three can appear on the same return. They address different circumstances and use separate worksheets.
The child tax credit is $2,500 per qualifying child for 2026. The One Big Beautiful Bill Act raised the credit from $2,000 — where it had been under the Tax Cuts and Jobs Act — to $2,500 per qualifying child. The higher amount applies starting with 2025 tax returns filed in 2026.
Yes. The credit phases out above $400,000 MAGI for married filing jointly and $200,000 MAGI for single filers and heads of household. The reduction is $50 for each $1,000 (or fraction thereof) of MAGI above those thresholds. At high enough income, the credit phases out entirely.
No. The child must be under age 17 — 16 or younger — on December 31 of the tax year. A child who celebrates their 17th birthday at any point during the tax year does not qualify for that year's child tax credit.
Partially. The Additional Child Tax Credit (ACTC) is the refundable portion of the CTC. If the credit exceeds your federal income tax liability, eligible families with earned income may receive some of the excess as a refund. The ACTC is calculated on Schedule 8812. Families with no earned income generally do not qualify for the refundable ACTC.
Yes. The OBBBA increase to $2,500 per qualifying child applies to tax years beginning in 2025, meaning it affects 2025 returns filed in 2026. If your 2025 return is on extension (deadline: October 15, 2026), the higher credit applies to that return as well.