The Tax Cuts and Jobs Act Increased the Child Tax Credit to What Amount?
Learn how the Tax Cuts and Jobs Act adjusted the Child Tax Credit, including eligibility, refundability, and income limits that may affect your tax benefits.
The Tax Cuts and Jobs Act (TCJA), passed in 2017, significantly altered the U.S. tax code, including changes to the Child Tax Credit (CTC). This credit helps families with dependent children by reducing tax liability. One major change under the TCJA was increasing the credit amount, making it more beneficial for many households.
Amount of the Credit
The TCJA raised the Child Tax Credit from $1,000 to $2,000 per qualifying child, providing greater relief, particularly for middle-income families. The credit applies to children under 17 and directly reduces a taxpayer’s federal income tax bill.
The full $2,000 credit is available to taxpayers with incomes below specific thresholds. A family with two qualifying children can receive up to $4,000 in total tax relief. Unlike some credits that phase in gradually, this one provides its full benefit to eligible families without a minimum income requirement.
Who Can Claim It
Eligibility depends on the child’s age, relationship to the taxpayer, residency, and financial support. The child must be under 17 at the end of the tax year and be a direct descendant, such as a son, daughter, stepchild, or foster child. Siblings, half-siblings, nieces, and nephews may also qualify if they meet dependency requirements.
The child must have lived with the taxpayer for more than half the year, with exceptions for temporary absences due to school, medical care, or military service. A valid Social Security number issued before the tax return’s due date is required.
Taxpayers must provide more than half of the child’s financial support. If the child supports themselves through employment, they may not qualify as a dependent. Additionally, the child cannot file a joint tax return unless it is solely to claim a refund of withheld taxes.
Refundable Portion
A portion of the Child Tax Credit is refundable, meaning taxpayers can receive money back even if they owe no taxes. The refundable portion, known as the Additional Child Tax Credit (ACTC), was increased to a maximum of $1,400 per child under the TCJA.
The refundable amount is calculated as 15% of earned income exceeding $2,500. For example, a taxpayer earning $20,000 would have $17,500 in excess income ($20,000 – $2,500). Fifteen percent of that amount is $2,625, but since the refundable portion is capped at $1,400 per child, they would receive $1,400 for each qualifying child.
Income Phaseouts
The Child Tax Credit phases out for higher-income households. The phaseout begins at a modified adjusted gross income (MAGI) of $200,000 for single filers and $400,000 for married couples filing jointly. For every $1,000 above these limits, the credit is reduced by $50 per child.
For example, a married couple with two qualifying children and a MAGI of $420,000 would see their credit reduced by $1,000—$50 multiplied by 20. MAGI includes adjusted gross income (AGI) with certain deductions added back, such as foreign earned income exclusions and tax-exempt interest.
Households near the threshold can use tax planning strategies to lower MAGI and maintain eligibility. Contributing to tax-deferred retirement accounts or health savings accounts can help reduce taxable income and preserve the credit.