The Child Tax Credit Is Partially Refundable

The Child Tax Credit is worth up to $2,000 per child under 17, but only part of it comes back to you as a refund if you owe no tax. The refundable portion is called the Additional Child Tax Credit, and it is limited to $1,700 per child for the 2023 tax year. That means if the credit is larger than the tax you owe, you get back up to $1,700 in cash — the rest is lost.

Whether you receive the full refundable amount depends on your earned income. You must have at least $2,500 in earned income (wages, self-employment income, or certain other sources) to claim any refundable portion. The more you earn above that threshold, the more of the credit can come back to you as a refund.

Key Takeaways

  • The Child Tax Credit is worth up to $2,000 per child, but only $1,700 of that is refundable for the 2023 tax year.
  • You must have at least $2,500 in earned income to claim the refundable portion; without it, you lose the refund part entirely.
  • The refundable amount phases in as your earned income rises above $2,500, so higher earners receive more of the credit back.
  • If you received advance payments of the credit in 2024, you will reconcile those payments on your 2024 tax return to see if you owe money back or receive additional refund.

How the Refundable and Non-Refundable Parts Work

The $2,000 credit breaks into two pieces. The first $1,300 is non-refundable, meaning it can only reduce the tax you owe — it cannot result in a refund check. If you owe $800 in tax and claim a $2,000 credit, that $1,300 non-refundable portion wipes out your $800 bill, and the remaining $500 of the non-refundable part is wasted.

The second piece, up to $1,700, is refundable. This portion can reduce your tax bill and, if there is money left over after your bill hits zero, the remainder comes back to you as a refund. Using the same example: after the non-refundable $1,300 eliminates your $800 tax, you have $700 of the refundable portion left. That $700 becomes a refund check to you.

The refundable amount is not automatic. You must have earned income to unlock it. The IRS calculates how much of the $1,700 refundable credit you can claim based on your earned income minus $2,500. If your earned income is $3,000, you can claim 15 percent of the $700 difference ($500), which is $75 of the refundable credit. At $4,000 earned income, the calculation gives you $225 of the refundable portion.

Earned Income Requirements and Phase-In

Earned income includes wages from a job, net self-employment income, and certain other sources like military housing allowances. It does not include investment income, Social Security, unemployment benefits, or child support. You report your earned income on your tax return, and the IRS uses that figure to determine your refundable credit amount.

The phase-in works at 15 percent of earned income above $2,500. For every dollar you earn above $2,500, you gain 15 cents of refundable credit, up to the $1,700 cap. That means you need roughly $13,000 in earned income to reach the full $1,700 refundable amount. Below $2,500, you get nothing refundable; at $2,500, you still get nothing; at $2,600, you get $15; at $3,000, you get $75.

What Happens If You Received Advance Payments

From July through December 2024, the IRS sent advance payments of the Child Tax Credit to many families — up to $200 per child per month. These were not automatic refunds; they were advances on the credit you would claim on your 2024 tax return. When you file that return, you must report how much you received and reconcile it against the full credit you are may have access to to.

If you received more in advance payments than your final credit amount, you may owe money back when you file. If you received less, you get the difference as a refund. The reconciliation happens on your tax return; there is no separate form or payment process. This is why it matters whether the credit is refundable — if you owe money back and your credit is non-refundable, you cannot use the non-refundable portion to offset what you owe back.

Income Limits and Phase-Out

The full $2,000 credit begins to reduce if your modified adjusted gross income (MAGI) exceeds certain thresholds. For single filers, the credit phases out starting at $400,000 MAGI; for married filing jointly, it starts at $800,000. The credit decreases by $50 for each $1,000 (or fraction thereof) of income above the threshold.

This phase-out applies to the entire $2,000 credit, including both the refundable and non-refundable portions. If your MAGI is $410,000 as a single filer, you lose $500 of the credit (10 × $50), leaving you with $1,500. The refundable portion of that $1,500 is then calculated using the earned income rule described above.

When You Might Lose the Refundable Portion

You lose the refundable portion of the credit if your earned income is below $2,500, regardless of how much total income you have. A parent with $100,000 in investment income but no wages or self-employment income cannot claim any refundable credit. They can still claim the non-refundable portion if they owe tax, but the refund part is off the table.

You also lose refundable credit if the non-refundable portion wipes out all your tax liability and you have no earned income to unlock the refundable amount. For example, if you owe $500 in tax, claim a $2,000 credit, and have no earned income, the non-refundable $1,300 eliminates your $500 bill, and the remaining $1,700 refundable portion cannot be claimed because you do not meet the earned income threshold.

How to Claim the Credit on Your Tax Return

You claim the Child Tax Credit on Form 1040 (the main individual income tax form) using Schedule 8812 if you are claiming the refundable portion. Schedule 8812 calculates your earned income, determines how much of the $1,700 refundable credit you can claim, and carries that amount to your main return. You will need the child's Social Security number, date of birth, and relationship to you.

If you use tax software, it will walk you through the questions and calculate the refundable amount automatically. If you file by hand or with a tax preparer, make sure they know your earned income so they can compute the refundable portion correctly. Many people miss refundable credit because they do not realize it requires a separate calculation.

Frequently Asked Questions

Can I get the full $2,000 as a refund?

No. The maximum refundable portion is $1,700 per child, and you must have at least $2,500 in earned income to claim any of it. If you have no earned income, you cannot receive any refund from this credit, though you can still use the non-refundable $1,300 to reduce your tax bill.

What counts as earned income for this credit?

Earned income includes wages from employment, net self-employment income, military housing allowances, and certain other sources. It does not include investment income, pensions, Social Security, unemployment, or child support. Check your tax return to see what the IRS counts as your earned income.

If I owe back advance payments, can I use the refundable credit to pay it?

The refundable credit is calculated and applied to your tax return as part of the reconciliation process. If you owe back more than your total credit, you will owe the difference. The refundable portion does not work separately to pay back advance payments — it all happens together on your return.

Do I have to claim the credit if I do not want it?

You are not required to claim it, but there is no reason not to. The credit reduces your tax or increases your refund. The only scenario where it might matter is if claiming it would reduce a different benefit you receive, but that is rare. Most people benefit from claiming it.

What if my child was born in December — can I claim the credit for that year?

Yes. The child must be under 17 at the end of the tax year, and you must have a valid Social Security number for them. A child born in December of the tax year counts as a dependent for that year, so you can claim the credit.