2026–2027 Updates: Child Tax Credit (CTC) and Kiddie Tax — Thresholds, Eligibility, and OBBBA Changes

The Child Tax Credit (CTC) is $2,200 per qualifying child for the 2026 tax year, following the One Big Beautiful Bill (OBBB) signed in 2025. That $200 increase from the prior $2,000 level is now locked in permanently and indexed for inflation going forward.

For most families, not much has changed dollar-for-dollar from 2025 to 2026 — but the structural rules are different, particularly the new SSN requirement for the person claiming the credit. Here’s what matters right now.

Key Changes to the Child Tax Credit (CTC) Under the OBBBA

The OBBBA made several permanent changes to the CTC starting with the 2025 tax year:

The credit is now $2,200 per qualifying child. That’s up from $2,000 under the old TCJA rules. It covers children under 17, same as before.

The credit is now inflation-indexed. Starting in 2026, the IRS adjusts the CTC amount annually for inflation, rounded to the nearest $100. For 2026, the base is still $2,200 — inflation hasn’t been sufficient to push it to $2,300 yet. The 2027 amount will depend on 2026 price data (more on that in the outlook section below).

A new SSN requirement for claimants. Beginning with 2025 tax returns, the taxpayer claiming the CTC — or at least one spouse if filing jointly — must have a valid Social Security Number. Previously only the child needed an SSN. This is a meaningful change for mixed-status households where children are U.S. citizens but one or both parents are not.

2026 CTC: Amounts, Refundable Portion, and Phase-Outs

For the 2026 tax year, here’s the full picture:

• Earned Income Requirement: You must have at least $2,500 in earned income (wages, self-employment) to claim any portion of the credit.
• Maximum Credit: $2,200 per qualifying child (non-refundable portion, applied against your tax liability first).
• Additional Child Tax Credit (ACTC): The refundable portion is up to $1,700 per child. You qualify for the ACTC at 15% of earned income above $2,500, up to the $1,700 per-child cap.
• Phase-Out Thresholds: The credit begins to reduce for modified AGI (MAGI) above $200,000 (single/HOH) or $400,000 (married filing jointly). It phases out at $50 for every $1,000 of income above those thresholds.

The phase-out thresholds are set by statute and are NOT inflation-indexed, so they don’t change year to year.

Child Tax Credit — Historical Table

The 2021 ARPA expansion that temporarily raised the credit to $3,000–$3,600 per child and paid it monthly is long expired. The OBBBA did not restore advance monthly payments — you claim it on your annual tax return.

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CTC Qualification Rules

To claim the Child Tax Credit, the child must meet all of the following tests:

1. Age: Under 17 at the end of the tax year (16 or younger).
2. Relationship: Your son, daughter, stepchild, foster child, sibling, step-sibling, or a descendant of any of these (grandchild, niece/nephew). An adopted child is always treated as your own.
3. Support: The child didn’t provide more than half their own financial support during the year.
4. Dependent: You claim the child as a dependent on your return — no one else can.
5. Citizenship: The child must be a U.S. citizen, U.S. national, or U.S. resident alien.
6. Residence: The child lived with you for more than half the year. If two taxpayers claim the same child, it causes delays for both.
7. SSN (claimant): Starting 2025, you (or your spouse if filing jointly) need a valid SSN. The child still needs an SSN as well.

Income limits from the table above also apply. The credit is further limited by your actual tax liability and any Alternative Minimum Tax (AMT) you owe.

CTC, ACTC, and ODC — What’s the Difference?

These three credits are related but distinct, and understanding which one you’re getting matters.

CTC ($2,200) is the full credit, but it’s non-refundable in the traditional sense — it can only offset your federal tax liability. If you owe nothing, you can’t get the CTC as a payment.

ACTC (up to $1,700) is the refundable piece. If your CTC exceeds your tax bill, you can still receive a refund through the ACTC — equal to 15% of your earned income above $2,500, per child, up to $1,700 per child.

Example — Mark and Lisa, married filing jointly with two children, earned $85,000. They owe $4,800 in federal taxes. Their CTC is $4,400 (2 × $2,200). The full $4,400 applies against their tax bill, bringing it to $400 owed. No ACTC is needed since the credit didn’t exceed their liability.

Example — Sarah, a single mother with two children, earns $24,500 and has no tax liability. She can’t use the non-refundable CTC. But her ACTC = 15% × ($24,500 − $2,500) × 2 kids = 15% × $22,000 = $3,300. That’s capped at $1,700 per child × 2 = $3,400 max. So she gets a refund of $3,300 as ACTC.

ODC ($500) covers dependents who don’t qualify for the CTC — like a college student over 17 or an elderly parent you’re supporting. It’s non-refundable and phases out at the same income thresholds ($200K/$400K).

You can also claim the Child and Dependent Care Tax Credit (CDCTC) alongside the CTC — they’re separate credits for separate purposes (care costs vs. having a qualifying child).

2026 Kiddie Tax: Unearned Income Thresholds

The kiddie tax is separate from the Child Tax Credit — it’s the rule that taxes a child’s investment income (dividends, interest, capital gains) at the parent’s higher marginal rate once it crosses a threshold.

For 2026, the rules are the same as 2025:

• First $1,350 of unearned income: Tax-free (covered by the dependent’s standard deduction)
• Next $1,350 (income from $1,350 to $2,700): Taxed at the child’s own rate
• Over $2,700: Taxed at the parent’s marginal tax rate

This applies to children who are:

• Under 19 at year-end, OR
• Full-time students between 19 and 23, AND
• Whose earned income doesn’t exceed half their support

A child who earns more than $2,700 in unearned income and meets the above criteria needs to file Form 8615 with their tax return.

Example — Emma, age 15, received $3,500 in stock dividends from a custodial account her parents funded. The first $1,350 is sheltered. The next $1,350 is taxed at Emma’s rate (likely 10–12%). The remaining $800 is taxed at her parents’ top marginal rate — say 22%. Without the kiddie tax, all $3,500 would be taxed at Emma’s low rate. Parents who gift appreciated assets to kids to exploit lower rates often run into this rule.

The kiddie tax does NOT apply once a child is 19 and not a student, or once they are 24 regardless of student status.

EITC and ACTC Refund Delays (PATH Act)

If you claim the Earned Income Tax Credit (EITC) or the ACTC, the IRS is legally required to hold your entire refund until mid-February — even the non-EITC/ACTC portion.

This is mandated by the PATH Act, an anti-fraud safeguard. It applies every year. Your refund freeze affects the refund schedule for the whole return, not just the credit portion.

You can track it on your IRS transcript once processing begins.

State Child Tax Credits

Several states have their own CTC on top of the federal credit. Qualifying criteria vary by state — federal CTC eligibility doesn’t automatically grant you a state CTC. Check your state’s department of revenue website and look for a state-level child tax credit line on your state return.

Common Issues to Watch Out For

1. Parent SSN requirement trips up mixed-status families. I get questions about this a lot. If you’re filing jointly and one spouse doesn’t have an SSN, neither of you can claim the CTC under the new OBBBA rule. This wasn’t required before 2025. Some families who previously qualified no longer do.

2. Confusing CTC with ACTC. The $2,200 is the maximum — but you only get cash back (a refund) through the ACTC, which is capped at $1,700 and requires earned income. If you have no tax liability AND very low earned income (under $2,500), you get nothing.

3. The $2,500 earned income floor matters more than people think. If you earn $2,499, you get zero CTC. At $2,501, you start phasing in. The pandemic waived this requirement in 2020–2021. It’s fully back now.

4. The kiddie tax catches parents who fund custodial accounts too generously. A $10,000 stock account paying 5% in dividends generates $500 in unearned income — well under the threshold. But a $100,000 account generating $5,000 in dividends means $2,300 is taxed at the parents’ rate, not the child’s. If you’re building a custodial account, keep this math in mind.

5. Dependent turning 17 during the tax year. If your child turns 17 at any point during the year, they do not qualify for the CTC that year. Not under 17 “at year end” means the whole credit is gone. I see this create confusion every filing season.

Looking Ahead: 2027 Outlook

The 2026 CTC is still $2,200 because the inflation adjustment hasn’t cleared the $100 rounding increment yet. For 2027, that depends on 2026 CPI data, which the IRS typically incorporates into a Revenue Procedure published in October or November 2026.

Here’s what I’m watching: if 2026 inflation runs around 3–4%, the raw adjustment on $2,200 would be roughly $66–$88. That’s not enough to round up to $100, so the credit stays at $2,200. For it to hit $2,300 in 2027, you’d need cumulative inflation to push the adjustment over $50 — about 2.3% in annualized terms from the OBBBA base.

The kiddie tax thresholds ($1,350 / $2,700) are also inflation-indexed and could tick up to $1,400 / $2,800 for 2027, depending on the same CPI data. Similarly likely to stay flat unless inflation is persistent.

The ACTC refundable cap ($1,700) is also indexed, and the same logic applies.

I’ll update this page when the IRS releases its 2027 adjustments. Subscribe here to get notified when that happens.