US Child Tax Credit: What to expect in 2026

If you have dependents under 17, you likely qualify for the Child Tax Credit (CTC). While the 2021 expansion under the American Rescue Plan was temporary, the OBBB (Our Better Budget Bill) has introduced permanent updates for the 2026 tax year and beyond.

What Is the CTC and how does it work?

A tax credit provides a dollar-for-dollar reduction of your tax liability. This differs from a deduction, which only lowers the amount of your income subject to tax. For example, if you owe $3,000 but have a $1,000 credit, your final bill drops to $2,000.

For the 2026 tax year, the maximum credit is $2,200 per child (up from $2,000 in 2025). The OBBB has implemented several key shifts:

• Permanent Increase: The maximum limit is now set at $2,200 per qualifying child.
• Refundability: While not fully refundable, the refundable portion is now $1,700.
• Inflation Indexing: Both the total credit and the refundable portion will now be adjusted annually for inflation.

Note on Income Limits: The Modified Adjusted Gross Income (MAGI) thresholds remain unchanged. Phase-outs begin at $200,000 for single/head-of-household filers and $400,000 for joint filers.

Eligibility criteria

To claim a dependent, the IRS requires they meet seven specific tests:

1. Age: The child must be under 17 at year-end. (Credits are increased for those under 6).
2. Relationship: Includes children, stepchildren, foster children, siblings, or descendants like nieces, nephews, or grandchildren.
3. Support: The child cannot provide more than half of their own financial support.
4. Dependent: You must claim the child as a dependent on your federal return.
5. Citizenship: The child must be a U.S. citizen, national, or resident alien with a Social Security number.
6. Residency: The child must live with you for more than half the year.
7. Income: At least one parent must have a valid Social Security number, and the family must have at least $2,500 in earned income to access the refundable portion.

How to claim your credit

You can claim the CTC on Form 1040 (line 12a) or Form 1040NR (line 49). To calculate your exact benefit, use the IRS "Child Tax Credit and Credit for Other Dependents Worksheet."

If you encounter issues with missing or incorrect payments, visit the IRS Child Tax Credit Update Portal. If the portal indicates a payment was sent but not received, you can initiate a trace by submitting Form 3911 via mail or fax.

Additional credits for children and dependents

Beyond the standard Child Tax Credit, there are further federal and state provisions designed to support families in caring for their dependents.

Child and Dependent Care Tax Credit (CDCTC)

The CDCTC is available to individuals with earned income who pay for care services for a dependent while they work or seek employment. Unlike the standard CTC, which is limited to minor children, the CDCTC can be applied to aging parents or disabled relatives.

Qualifying dependents include:

• Children aged 12 or younger at the close of the tax year.
• Adult family members or spouses unable to care for themselves due to physical or mental impairments, provided their gross income is below $5,200 in 2026.