Child Tax Credit: How the Child Tax Credit Works in the USA

Families who live in or plan to settle in the United States have access to a federal tax benefit that can make a real difference in the household budget: the Child Tax Credit (CTC). Since 2025, with the approval of the One Big Beautiful Bill Act, the credit has increased to up to $2,200 per qualifying child, accompanied by new rules that every taxpayer needs to know.

The Child Tax Credit directly reduces the federal income tax owed and can even generate a refund for lower-income families. For Brazilians and other immigrants building a life in the US, understanding this credit is an essential part of family financial planning.

What Is the Child Tax Credit

The Child Tax Credit is a tax credit granted by the federal government to eligible taxpayers with children under 17 years old. Unlike a deduction, which only reduces taxable income, a tax credit directly reduces the amount of tax owed, dollar for dollar. If a family owes $5,000 in taxes and is entitled to $2,200 in CTC for one child, the tax drops to $2,800.

The benefit has existed since 1997 but has undergone several legislative changes over the years. The most recent change came with the One Big Beautiful Bill Act (OBBBA), which increased the maximum amount and introduced new eligibility requirements starting in the 2025 tax year.

Updated Amounts for 2025

With the approval of the OBBBA, the Child Tax Credit underwent important changes for the 2025 tax year (returns filed in 2026):

• Maximum credit: $2,200 per qualifying child, an increase of $200 from the previous amount of $2,000
• Refundable portion (ACTC): up to $1,700 per child, for families whose credit exceeds the tax owed
• Inflation adjustment: starting in 2026, the credit amount will be adjusted annually for inflation

The refundable portion, called the Additional Child Tax Credit (ACTC), means that even families with little or no tax to pay can receive part of the credit as a cash refund, provided they have a minimum of $2,500 in earned income.

Who Is Eligible

Child Requirements

• Age: the child must be under 17 years old on the last day of the tax year
• Relationship: must be the taxpayer’s child, stepchild, adopted child, sibling, half-sibling, niece/nephew, or grandchild
• Residency: must have lived with the taxpayer for more than half of the tax year, with exceptions for temporary absences such as school or medical treatment
• Support: the child cannot have provided more than half of their own support during the year
• Citizenship: must be a US citizen, US national, or US resident alien
• Required SSN: the child must have a valid Social Security Number for employment purposes; ITIN is not accepted

Taxpayer Requirements

• Income: the full credit is available to married couples filing jointly with AGI up to $400,000, and to all other taxpayers with AGI up to $200,000. Above these limits, the credit is reduced by $50 for every $1,000 over the threshold
• Required SSN (new rule 2025): starting in 2025, the taxpayer, or spouse on a joint return, must have a valid SSN for employment purposes. Previously, only the child needed the SSN
• Tax residency: the taxpayer must be a US citizen, US national, or US resident alien

How to Claim the Credit

To claim the Child Tax Credit, the taxpayer must complete Form 1040 (U.S. Individual Income Tax Return) and include information for all qualifying children, including each child’s full name and SSN. The credit is calculated based on the information provided in the return.

If the credit amount exceeds the tax owed, the refundable portion can be claimed using Schedule 8812 (Credits for Qualifying Children and Other Dependents), which accompanies Form 1040. It is essential to fill out this form correctly to ensure full receipt of the benefit.

Taxpayers using tax preparation software will have the calculation done automatically when entering dependent information. For more complex returns, especially for recent immigrants, consulting a tax professional can help avoid errors that delay the refund.

Impact on Family Budget

For a family with two qualifying children, the Child Tax Credit can represent savings of up to $4,400 in federal taxes per year. If the family’s income results in little or no tax owed, the refundable portion can return up to $3,400 in cash.

This amount is especially relevant for immigrant families in their first years in the United States, when adaptation, housing, and children’s education costs are higher. In addition to the federal CTC, some states offer additional state child tax credits, which can further increase the total benefit.

Common Mistakes to Avoid

• Using ITIN instead of SSN for the child: the IRS requires a valid SSN for employment purposes. Children with only an ITIN do not qualify for the CTC, although they may qualify for the Credit for Other Dependents, worth $500
• Not updating the taxpayer’s SSN: with the new 2025 rule, taxpayers filing with an ITIN will not be able to claim the CTC, even if the child has an SSN
• Ignoring income limits: the credit is gradually reduced above the AGI limits and can reach zero for very high incomes
• Forgetting to renew the ITIN: expired ITINs cause delays in processing the return and can result in the temporary loss of tax benefits
• Not claiming the refundable portion: many eligible families fail to complete Schedule 8812 and miss the opportunity to receive the ACTC in cash

Other Credits for Families

In addition to the Child Tax Credit, families in the US can benefit from other tax credits related to dependents. The Credit for Other Dependents offers $500 per dependent who does not qualify for the CTC, such as children 17 or older, elderly parents, or dependents with an ITIN. The Earned Income Tax Credit (EITC) is another relevant benefit for low- to moderate-income families, reaching over $7,000 for families with three or more children.

Knowing the range of available benefits allows immigrant families to maximize their tax savings and direct resources toward investing in their children’s education, housing, and building wealth in the United States.

Victoria Harper

Editor-in-Chief

Meet the author

Leading journalism and editorial content at Visto n’ Visa, Victoria helps make immigration topics clear, trustworthy, and easy to understand. Her focus is on delivering useful, human, and relevant content for people exploring new paths abroad.