Tax Season 2026: Navigating the Expanded Child Tax Credit
Families preparing for the 2026 tax season can anticipate potential changes to their refunds thanks to updates to the child tax credit stemming from legislation often referred to as the “big beautiful bill.” The maximum child tax credit is permanently increasing to $2,200 per child for the 2025 tax year, a change that will be fully reflected in refunds issued in 2026.
What’s Changing with the Child Tax Credit?
The most significant update is the permanent increase to $2,200 per qualifying child, up from $2,000. Beginning with the 2025 tax year, the credit will also be indexed to inflation starting in 2026, meaning it will adjust with the cost of living. Income phaseout thresholds remain unchanged, and refundability rules still apply, impacting how much lower-income families can receive.
How Will This Impact Your 2026 Refund?
For families who previously qualified for the full $2,000 credit, this change could translate to a $200 higher refund or a $200 lower tax bill per child when filing in early 2026. Approximately 90 percent of families with children have received the child tax credit in recent years, with the average tax break exceeding $2,500. Nearly 37 million tax returns claimed the credit or credit for other dependents in a single year.
Understanding the Refundable Portion: The Additional Child Tax Credit
The Additional Child Tax Credit (ACTC) is the refundable portion of the benefit. The maximum refundable amount is capped at $1,700 per child, even if the total credit is $2,200. Families with no tax liability cannot receive more than $1,700 per child as a refund. This means lower-income families may not receive the full $2,200 amount.
Pro Tip: To maximize your refund, ensure you understand the difference between the total credit and the refundable portion.
Income Limits and Eligibility
The income limits for the child tax credit have not changed. The credit begins to phase out for:
- Single filers and heads of household earning over $200,000
- Married couples filing jointly earning over $400,000
To receive the refundable portion, families must meet an earnings threshold. The credit phases in after $2,500 of earned income, with the refundable amount equaling 15 percent of earnings above that threshold, up to the $1,700 cap.
Who Qualifies as a “Qualifying Child”?
To claim the child tax credit, the child must meet several requirements:
- Be under age 17 at the conclude of the tax year
- Be your son, daughter, stepchild, foster child, sibling, or a descendant of one of these
- Have lived with you for more than half the year
- You must have provided more than half of the child’s financial support
- Have a valid Social Security number
How Does This Compare to Other Family Tax Breaks?
Unlike the Child and Dependent Care Tax Credit, which is based on actual childcare expenses, the child tax credit is not tied to expenses. It’s based solely on income and whether you have a qualifying child.
Indexing to Inflation: A Long-Term Benefit
Beginning in 2026, the child tax credit will be indexed to inflation. This means the $2,200 amount could increase over time, keeping pace with the rising cost of living without requiring further legislative action.
What Should Families Do Now?
To ensure you receive the maximum benefit:
- File your tax return even if your income is low
- Verify Social Security numbers for all qualifying children
- Check your income and tax liability to estimate refundability
- Consider adjusting your tax withholding
Frequently Asked Questions (FAQ)
Q: What if I don’t owe any federal income tax?
A: You may still receive a refund through the Additional Child Tax Credit, but it’s capped at $1,700 per child.
Q: Will the child tax credit amount increase automatically each year?
A: Yes, starting in 2026, the credit will be adjusted annually for inflation.
Q: What if my income is slightly above the phaseout threshold?
A: The credit is reduced gradually as your income increases above the threshold.
Q: Where can I identify more information about the child tax credit?
A: Visit the IRS website for detailed information and resources.
The expanded child tax credit represents a significant opportunity for millions of families. Understanding the details and planning ahead can support you maximize your benefit during the 2026 tax season.
