Deductions and Credits · Credits

Child tax credit and credit for other dependents

Section 24 cannot be read from the top. The credit amount in subsection (a), the phase-out thresholds in subsection (b)(2) and the earned income floor in subsection (d)(1)(B)(i) have not applied since 2017. Subsection (h) overrides all of them, and Pub. L. 119-21 made that overlay permanent while raising the credit. Anyone quoting a figure out of the body of the section is quoting law that has been switched off for nine years.

The rule

The credit and the overlay. A credit is allowed for each qualifying child of the taxpayer (IRC § 24(a)). For every taxable year beginning after 2017, the section is applied as provided in § 24(h)(2)–(7), which substitute a different credit amount, a different threshold, a cap on the refundable part, a lower earned income floor, and a social security number requirement. The credit for 2026 is $2,200 for each qualifying child for taxable years beginning in 2026, indexed from 2026 under IRC § 24(i)(2) with the increase rounded down to a multiple of $100^TY2026.

Qualifying child. A qualifying child of the taxpayer within § 152(c) who under age 17 at the close of the calendar year — IRC § 24(c)(1), which is stricter than the § 152(c)(3) age test for a dependent^TY2026 (IRC § 24(c)(1)). Section 152(c) itself requires a relationship — a child of the taxpayer or a descendant, or a sibling, step-sibling or a descendant of one — the same principal place of abode for more than half the year, an age test, no more than half of the individual’s own support provided by the individual, and no joint return other than a refund claim (IRC § 152(c)(1)(A)–(E), (2)). Section 24(c)(2) excludes a child who would not be a dependent if the § 152(b)(3)(A) residency rule were read without everything following “resident of the United States”.

The phase-out. The credit is reduced by $50 of credit for each $1,000, or fraction of $1,000, of modified adjusted gross income above the threshold — modified by adding back income excluded under IRC §§ 911, 931 and 933^TY2026 (IRC § 24(b)(1)). The threshold is $400,000 on a joint return and $200,000 in any other case — the IRC § 24(h)(3) figures, which are not indexed and which displace the much lower § 24(b)(2) amounts still printed in the statute^TY2026. Because the reduction runs on whole or partial thousands, a single dollar over a thousand-dollar boundary costs a full step.

Refundability. The credit is not fully refundable. Section 24(d)(1) makes the refundable portion the lesser of two amounts: the credit determined without regard to § 24(d) and without the § 26(a) tax liability limitation — capped per qualifying child at $1,700 for each qualifying child for taxable years beginning in 2026 — the IRC § 24(h)(5) cap of $1,400 as indexed from 2024 under § 24(i)(1)^TY2026 by § 24(h)(5) — or the amount by which the taxpayer’s allowable credits would increase if the § 26(a) limitation were raised by 15 percent of earned income above $2,500, the IRC § 24(h)(6) substitution for the $3,000 printed in § 24(d)(1)(B)(i)^TY2026. A taxpayer with three or more qualifying children may instead use the excess of their social security taxes over the § 32 credit (IRC § 24(d)(1)(B)(ii)). In practice the refundable amount is the unused credit, capped both per child and by the earned income formula.

The credit for other dependents. The credit determined under § 24(a) is increased by $500 for each dependent of the taxpayer within IRC § 152 who is not a qualifying child described in § 24(c) — a nonrefundable increase in the child tax credit, not a separate credit, and not indexed^TY2026 (IRC § 24(h)(4)(A)). Three points follow from the way it is drafted. It is an increase in the child tax credit, so the same § 24(b) phase-out and the same threshold apply to it. It is expressly excluded from the refundable computation, because § 24(h)(5) directs that § 24(d)(1)(A) be applied without regard to § 24(h)(4). And the dependent must still be a dependent within § 152 — every relationship, support, residency and citizenship test that § 152 imposes still has to be met.

Identification. No credit is allowed with respect to a qualifying child unless the return carries both the taxpayer’s social security number — at least one spouse’s on a joint return — and the child’s, each issued to a citizen or to a work-authorized individual, and issued before the return’s due date (IRC § 24(h)(7)(A), (B)). A child who fails only this test is not lost entirely: § 24(h)(4)(C) treats that child as a dependent eligible for the smaller other-dependent amount. The body of the section adds its own weaker requirements at § 24(e)(1) and (2), which the § 24(h)(7) overlay supersedes for the qualifying child.

Two more restrictions. No credit is allowable for a taxable year of fewer than 12 months, except a year closed by the taxpayer’s death (IRC § 24(f)). And a taxpayer whose earlier claim was disallowed is locked out for ten taxable years after a final determination of a fraudulent claim and two taxable years after a final determination of reckless or intentional disregard of the rules (IRC § 24(g)(1)(B))^TY2026, with a lesser requirement — production of whatever information the Secretary requires — where the earlier denial came through the deficiency procedures (IRC § 24(g)(1), (2)).

Current figures

How it works in practice

Count the children, then the other dependents, then run one phase-out over the total, then split the result into a nonrefundable part and a refundable part.

Counting. A child aged 16 at the close of the year is a qualifying child; the same child at 17 is not, but is almost always still a dependent, so the credit does not vanish — it shrinks to the other-dependent amount. That single fact accounts for most of the questions on this topic.

The phase-out over the total. The reduction applies to the credit as increased by the other-dependent amounts, so a family with two young children and a dependent parent phases out one combined figure rather than three separate ones.

Splitting the result. Apply the credit against tax first. Whatever is left over is potentially refundable, subject to two ceilings: the per-child cap, and 15 percent of earned income above the floor. The earned income formula is what excludes a family with no earnings — a household living entirely on investment income or benefits gets no refundable child tax credit however many children it has.

Where the phase-out bites, remember which income figure is used. It is modified adjusted gross income — adjusted gross income increased by amounts excluded under §§ 911, 931 and 933 — so a taxpayer claiming the foreign earned income exclusion adds it back for this purpose.

How this has changed

Pub. L. 119-21 § 70104 made four amendments to § 24, all applying to taxable years beginning after 31 December 2024. It struck ”, and before January 1, 2026” from § 24(h)(1) and changed the heading of the subsection from “2018 through 2025” to “after 2017”, so the overlay no longer expires: permanent — Pub. L. 119-21 § 70104 struck the 1 January 2026 end date from IRC § 24(h)(1), changed the subsection heading to read 'after 2017', and raised the credit, all for taxable years beginning after 31 December 2024^TY2026. It raised the substituted credit amount in § 24(h)(2). It rewrote § 24(h)(5), which had carried both the refundable cap and its own inflation rule, and moved the indexing into § 24(i)(1). And it rewrote § 24(h)(7) so that the return must now carry a social security number for the taxpayer as well as for the child — where the former paragraph required only the child’s.

That last change is easy to miss and it costs the whole credit. A couple where one spouse has an individual taxpayer identification number rather than a social security number still qualifies, because § 24(h)(7)(A)(i) asks for the number of at least one spouse on a joint return. A single filer with an ITIN does not.

Section 24(i) was rewritten entirely. Its former contents are gone, replaced by two inflation adjustments and a rounding rule: an inflation increase that is not a multiple of $100 is rounded to the next lowest multiple of $100 (IRC § 24(i)(3)) — which is why the 2026 credit is unchanged from 2025 while the refundable cap rose^TY2026. The credit amount for 2026 is confirmed at Rev. Proc. 2025-32 § 3.05(1) and the refundable cap, which did move, at § 3.05(2).

Exam focus

The examiners test the age line and the other-dependent amount more than anything else. Be able to say immediately that under 17 at the close of the year is the test, that a 17-year-old dependent brings the smaller amount, and that the smaller amount is never refundable. Know the threshold — and know that it is the § 24(h)(3) figure, not the number printed in § 24(b)(2).

For computation, expect a question that gives a tax liability below the credit and asks for the refund. Run it as: credit against tax, then the lesser of the per-child cap, the unused credit, and 15 percent of earned income above the floor. Know that the credit is not fully refundable and has not been since 2021.

Be alert to any source, question or seminar that gives a larger credit for a child under 6, a 17-year-old qualifying child, full refundability, or a threshold in the low hundreds of thousands. Every one of those is a 2021 number, and every one of them is wrong for 2026.

Check yourself

1. A single taxpayer with modified adjusted gross income of $214,300 has two qualifying children. What is the credit before any refundability analysis?

Answer: $3,700. The credit starts at $4,400. Modified adjusted gross income exceeds the § 24(h)(3) threshold of $200,000 by $14,300, which is fourteen full thousands and a fraction, so fifteen steps of $50 apply — a reduction of $750. Note that the fraction counts as a whole step under § 24(b)(1).

2. A married couple have earned income of $6,000, no tax liability, and three qualifying children. How much of the credit is refundable?

Answer: $525. Fifteen percent of earned income above $2,500 — 15 percent of $3,500 — is $525, and that is far below both the unused credit and the per-child cap, so it controls. The alternative in § 24(d)(1)(B)(ii) for three or more children uses social security taxes less the § 32 credit, which on these facts is unlikely to be larger.

3. Why does a taxpayer’s 19-year-old dependent son, a full-time student living at home, produce only a small credit?

Answer: Because IRC § 24(c)(1) requires a qualifying child to be under 17 at the close of the calendar year. He is a qualifying child under § 152(c)(3)(A)(ii) as a student under 24, but not one described in § 24(c), so § 24(h)(4)(A) treats him as an other dependent worth $500, nonrefundable.

4. A return claims two children. One has a social security number issued in March, after the April due date passed unextended. What is the consequence?

Answer: No child tax credit for that child, because § 24(h)(7)(B)(ii) requires the number to be issued before the return’s due date. Section 24(h)(4)(C) then treats that child as a dependent eligible for the $500 other-dependent amount. The other child’s credit is unaffected.

5. A taxpayer’s child tax credit was disallowed three years ago on a final determination that the claim was due to reckless disregard of the rules. May the taxpayer claim it this year?

Answer: Yes. IRC § 24(g)(1)(B)(ii) sets the disallowance period at two taxable years after the most recent year for which there was such a determination, and three years have passed. Ten years would apply had the determination been one of fraud.