The CTC Just Got Bigger — And Permanent
The One Big Beautiful Bill Act (OBBBA), signed July 2025, made two changes families have been waiting for: it permanently increased the Child Tax Credit to $2,200 per qualifying child and locked in the expanded eligibility rules that were set to expire after 2025.
This isn’t a temporary stimulus credit. It’s now part of the permanent tax code. Here’s exactly how it works for 2026 filing season.
What Changed: Before vs. After OBBBA
| Feature | Pre-2025 | 2025 (TCJA sunset) | 2026 (OBBBA permanent) |
|---|---|---|---|
| Maximum credit per child | $2,000 | $1,000 (scheduled) | $2,200 |
| Refundable portion | $1,600 | $1,000 (scheduled) | $1,700 |
| Age cutoff | Under 17 | Under 17 | Under 17 |
| Income phase-out (MFJ) | $400,000 | $110,000 (scheduled) | $400,000 |
| Income phase-out (Single) | $200,000 | $75,000 (scheduled) | $200,000 |
| Inflation indexing | None | None | Yes, starting 2027 |
| Expiration | Dec 31, 2025 | — | Permanent |
The biggest win: families earning $110,000–$400,000 who would have lost most of their credit under the TCJA sunset keep the full $2,200.
Who Qualifies: The Five Tests
Your child must meet ALL five requirements:
- Age: Under 17 at the end of the tax year (turns 17 on Dec 31? You miss the cutoff for that year)
- Relationship: Son, daughter, stepchild, foster child, sibling, half-sibling, or a descendant of any of these (grandchild, niece/nephew if you’re the caregiver)
- Support: The child didn’t provide more than half of their own financial support
- Residency: The child lived with you for more than half the year (183+ nights). Exceptions for birth, death, divorce/separation, and temporary absences (school, medical, vacation)
- SSN: The child has a valid Social Security Number issued before the return due date (including extensions)
Dependent status: The child must be claimed as a dependent on your return. If the parents are unmarried and filing separately, only the custodial parent (the one the child lived with longer) can claim the credit — unless Form 8332 releases the claim.
How Much Do You Actually Get?
The credit phases out at $50 reduction per $1,000 of modified AGI above the threshold:
| Filing status | Full $2,200 if MAGI below | Phases out between | Zero credit above |
|---|---|---|---|
| Married filing jointly | $400,000 | $400,000–$436,000 | $436,000 |
| Head of household | $200,000 | $200,000–$236,000 | $236,000 |
| Single | $200,000 | $200,000–$236,000 | $236,000 |
| Married filing separately | $200,000 | $200,000–$236,000 | $236,000 |
Example: Married couple, 3 kids under 17, MAGI $410,000.
- Phase-out amount: ($410,000 - $400,000) / $1,000 × $50 = $500
- Credit per child: $2,200 - $500 = $1,700… wait, the phase-out reduces the TOTAL credit, not per-child.
- Total credit before phase-out: 3 × $2,200 = $6,600
- Reduction: $500
- Final credit: $6,100
The Refundability Boost
This is the change that helps lower-income families most:
- Maximum refundable amount: $1,700 per child (up from $1,600)
- Calculation: 15% of earned income above $2,500, up to $1,700 per child
- What “refundable” means: even if your tax liability is $0, you can receive up to $1,700 per child as a refund
Example: Single parent earning $22,000/year with 2 children.
- Tax liability: roughly $0 (standard deduction $15,750 + CTC reduces further)
- Refundable CTC: 15% × ($22,000 - $2,500) = $2,925 → capped at 2 × $1,700 = $3,400
- Actual refundable amount: $2,925 (the 15% formula is the limiting factor)
- Without refundability: $0. With it: $2,925 deposited directly.
The “Who Gets Left Out” Problem
Not every child qualifies. The OBBBA maintained two restrictions that affect millions of families:
1. SSN requirement (no ITIN-only children) Children who are undocumented or have parents with ITINs but no SSN cannot generate a CTC claim. This excludes roughly 4.1 million children from the credit entirely.
2. The “qualifying child” definition is narrow
- 17-year-olds: no credit (even if they’re seniors in high school)
- Adult dependents (college students 19–23, disabled relatives): only the $500 “Other Dependent” credit, not $2,200
- Children in joint custody: only one parent can claim (the one with more overnights)
Child and Dependent Care Credit: The Other Credit You Might Be Missing
Separate from the CTC, the Child and Dependent Care Credit (Section 21) got enhanced under OBBBA:
| Feature | Pre-2026 | 2026+ |
|---|---|---|
| Max expenses (1 child) | $3,000 | $6,000 |
| Max expenses (2+ children) | $6,000 | $12,000 |
| Credit percentage | 20%–35% | 20%–50% |
| Max credit (1 child) | $1,050 | $3,000 |
| Max credit (2+ children) | $1,200–$2,100 | $6,000 |
| AGI phase-out starts | $15,000 (reducing %) | $15,000 |
| Fully nonrefundable | Yes | Yes (for now) |
This is specifically for childcare costs that allow you to work — daycare, after-school programs, summer day camp, babysitters (with a W-2 or 1099). Not for kindergarten tuition or overnight camp.
You can claim BOTH the CTC ($2,200) AND the Dependent Care Credit ($3,000–$6,000) for the same child. They’re independent.
Common Mistakes That Cost Families Thousands
-
Not filing even if income is too low to owe tax. The refundable CTC means you can get money back even with $0 tax liability. Non-filers leave $1,700–$3,400 on the table per child.
-
Assuming the credit covers a 17-year-old. The cutoff is “under 17 at year-end.” If your child turns 17 before Dec 31, they’re only eligible for the $500 Other Dependent Credit.
-
Missing the foster placement documentation. If you have a foster child placed by an authorized agency, they qualify — but you need the placement paperwork. Informal arrangements (“my sister’s kid lives with us”) don’t count unless you claim them as a dependent.
-
Forgetting to update your W-4. If you previously had $0 CTC reflected in your withholding, your paychecks just got bigger (or should have). Check line 2 of your most recent pay stub.
-
Claiming a child both parents filed for. The IRS matches SSNs across returns. If two parents claim the same child, both returns get flagged for review. The custodial parent (more overnights) wins unless Form 8332 was properly filed.
Planning Ahead: Inflation Indexing Starts 2027
Starting in tax year 2027, the $2,200 credit and the $400,000/$200,000 thresholds will be adjusted for inflation. Based on current CPI trends, expect:
- CTC: ~$2,270–$2,300 per child
- MFJ threshold: ~$410,000
- Single threshold: ~$205,000
This means the credit won’t erode in real value over time — a significant improvement over the old system where the $1,000 CTC stayed frozen from 2003 to 2017.
Action Steps
- Check your W-4 — make sure the CTC is reflected in withholding so you’re not underpaying or overpaying
- Gather SSN cards for all qualifying children before filing season
- If you have childcare expenses, keep receipts — you can claim both CTC and Dependent Care Credit
- If your child turns 17 in 2026, this is the last year for the $2,200 credit. Plan accordingly
- If you’re divorced/separated, confirm who claims which child. Form 8332 must be signed and attached
This article reflects tax law as of October 23, 2026 (OBBBA, P.L. 119-1). Tax credits and thresholds are subject to legislative change. Consult IRS Publication 972 or a qualified tax preparer for your specific situation.