In short
For 2026 the child tax credit is $2,200 per child under 17, of which $1,700 is refundable (limited to 15% of earned income over $2,500), phasing out above $200,000 / $400,000 of MAGI. The EITC is worth up to $664, $4,427, $7,316 or $8,231 with 0, 1, 2 or 3+ children and is fully refundable. A married couple with two children on $65,000 owes $3,440 of tax, which the CTC wipes out, and receives a $960 refundable credit plus about $190 of EITC.
Three federal credits do most of the work for families with children: the child tax credit (CTC), the earned income tax credit (EITC) and the child and dependent care credit. Each has its own rules on refundability and phase-outs, and they interact with each other and with paycheck withholding. This guide gives the 2026 figures, shows the order they are applied in, and works through a married couple with two children on $65,000. By the end you will be able to estimate your refund and decide whether to adjust your W-4.
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The child tax credit: $2,200 per child
For 2026 the credit is $2,200 for each qualifying child under 17 at year end, and $500 for each other dependent (an older child, a college student, a parent you support). The child needs a Social Security number valid for employment and must live with you more than half the year; a child with only an ITIN gets the $500 credit instead. The credit does not depend on childcare costs.
Phase-out
The credit falls by $50 for every $1,000 (or part of $1,000) of modified AGI above $200,000 for single and head-of-household filers, or $400,000 for married filing jointly. One child’s credit is gone at $244,000 / $444,000; two children’s at $288,000 / $488,000.
The refundable part
The CTC first reduces your income tax. If it is bigger than your tax, up to $1,700 per child comes back as a refund — the additional child tax credit (ACTC) — limited to 15% of earned income above $2,500. A parent earning $12,000 can receive at most 15% × ($12,000 − $2,500) = $1,425, whatever the number of children. The other $500 per child is non-refundable and is lost if your tax is too low to absorb it.
The earned income tax credit for 2026
The EITC is fully refundable. It phases in as a percentage of earned income, plateaus, then phases out as income rises. The 2026 parameters from Rev. Proc. 2025-32:
| Qualifying children | Maximum credit | Phase-in rate | Earned income for maximum | Phase-out starts (single / joint) | Credit is zero at (single / joint) |
|---|---|---|---|---|---|
| 0 | $664 | 7.65% | $8,680 | $10,860 / $18,140 | $19,540 / $26,820 |
| 1 | $4,427 | 34% | $13,020 | $23,890 / $31,160 | $51,593 / $58,863 |
| 2 | $7,316 | 40% | $18,290 | $23,890 / $31,160 | $58,629 / $65,899 |
| 3 or more | $8,231 | 45% | $18,290 | $23,890 / $31,160 | $62,974 / $70,244 |
The phase-out rate follows from the table: with two children the $7,316 credit disappears over $65,899 − $31,160 = $34,739 of joint income, so each extra dollar costs 21.06 cents of credit (15.98% with one child, 7.65% with none), measured on the greater of earned income and AGI. Two hard limits: investment income over $12,200 disqualifies you entirely, and workers without children must be 25 to 64. Net self-employment profit is earned income. The EITC calculator applies the formula; the IRS table rounds in $50 steps.
The child and dependent care credit
From 2026 the credit for daycare, after-school care and day camp for a young child or a disabled dependent is 50% of up to $3,000 of expenses for one qualifying person or $6,000 for two or more at AGI of $15,000 or less. The rate falls one point per $2,000 of AGI to 35%, holds until $75,000 of AGI ($150,000 joint), then falls one point per $2,000 ($4,000 joint) to a 20% floor — so the maximum is $1,500 / $3,000 at 50% and $600 / $1,200 at 20%. It is non-refundable. A dependent care FSA lets you set aside up to $7,500 pre-tax instead, but every FSA dollar reduces the expense cap for the credit; the child and dependent care credit calculator compares the two at your income.
How the credits are applied, in order
The sequence on Form 1040 matters because some credits are refundable and some are not:
- Income tax is computed on taxable income (federal tax brackets guide).
- Non-refundable credits such as the dependent care credit reduce that tax, but not below zero.
- The non-refundable part of the CTC absorbs whatever tax is left.
- Any unused CTC becomes the refundable ACTC, up to $1,700 per child and 15% of earned income over $2,500.
- The EITC is added in full as a refundable credit.
- Withholding is credited; the result is your refund or balance due.
Because the dependent care credit is applied first, it is not wasted when the CTC would have used up the tax anyway — it pushes more of the CTC into the refundable part, as the example shows.
Worked example: married filing jointly, two children under 17, $65,000 of wages
Tax before credits. Taxable income = $65,000 − $32,200 standard deduction = $32,800. Tax = $24,800 × 10% + ($32,800 − $24,800) × 12% = $2,480 + $960 = $3,440.
Child tax credit. 2 × $2,200 = $4,400, no phase-out. $3,440 wipes out the tax; the remaining $960 is refundable, because the ACTC limit is the lesser of 2 × $1,700 = $3,400 and 15% × ($65,000 − $2,500) = $9,375. $960 is refunded.
EITC. Income is above the $31,160 joint threshold by $33,840, so the credit is $7,316 − 21.06% × $33,840 = $7,316 − $7,127 = about $190 (the IRS table rounds). At $45,000 of income the same family would receive about $4,400.
Result with no childcare costs: federal income tax of zero and a refund of $960 + $190 = $1,150 on top of every dollar withheld during the year.
If they also paid $6,000 of daycare: at $65,000 of AGI the care rate is 35%, so the credit is $2,100. Applied first, it cuts tax to $1,340; the CTC absorbs that and the other $3,060 becomes refundable ACTC (under the $3,400 cap). Refund = $3,060 + $190 = $3,250 plus withholding — the daycare credit is worth its full $2,100 even though the CTC alone would have zeroed the tax.
Credits and your withholding
Withholding tables do not know about your children unless you tell them. On Form W-4, Step 3 takes $2,200 per qualifying child and $500 per other dependent; the couple above would enter $4,400, spreading that reduction over the year’s paychecks. Leave it blank and you lend the money to the IRS and get it back as a larger refund — here, $1,150 plus all the tax withheld on $65,000. Refunds that include the EITC or ACTC are held until mid-February by law. The W-4 guide and the W-4 withholding calculator show how to set the form so the year ends close to zero.
Common mistakes
- Expecting the full $2,200 per child as a refund. Only $1,700 is refundable, limited to 15% of earned income over $2,500; the last $500 needs tax to offset.
- Claiming a child who turned 17 during the year. The test is age at 31 December; a 17-year-old gets the $500 credit.
- Not filing because income is low. The EITC and ACTC are paid only to people who file; about one in five eligible workers never claims the EITC.
- Measuring the EITC phase-out on earned income only. It uses the greater of earned income and AGI, so interest or dividends can shrink it.
- Funding a $7,500 dependent care FSA and expecting the credit too. With two children the FSA uses up the $6,000 cap.
- Both divorced parents claiming the same child. Only the parent who claims the child as a dependent takes the CTC.
Frequently asked questions
How much is the child tax credit for 2026?
$2,200 per qualifying child under 17 with a Social Security number, up to $1,700 of it refundable, plus $500 per other dependent. It phases out by $50 per $1,000 of modified AGI above $200,000 (single or head of household) or $400,000 (joint).
What is the maximum EITC in 2026?
$664 with no qualifying children, $4,427 with one, $7,316 with two and $8,231 with three or more, fully refundable. It ends at $19,540 to $62,974 of income for single filers, or $26,820 to $70,244 joint.
Can I get the child tax credit if I owe no tax?
Partly. Up to $1,700 per child is refundable, limited to 15% of earned income above $2,500; with $12,000 of earnings that is $1,425.
Is the child and dependent care credit refundable?
No. It reduces tax owed only: 50% of up to $3,000 / $6,000 of expenses at AGI of $15,000 or less, falling to 35% and then to a 20% floor at higher incomes.
Should I enter my children on my W-4?
Enter $2,200 per qualifying child in Step 3 to receive the credit through the year; leaving it blank over-withholds and produces a larger April refund. Neither changes the total credit.
Sources
- Rev. Proc. 2025-32; IRC §24 as amended by the One Big Beautiful Bill Act — $2,200 credit, $1,700 refundable amount, 15% / $2,500 rule, phase-out thresholds and $500 other-dependent credit, checked 8 October 2026.
- Rev. Proc. 2025-32, section 4.06 (§32) — Earned income credit — 2026 EITC amounts, thresholds and $12,200 investment-income limit, checked 8 October 2026.
- IRC §21 (as amended by P.L. 119-21 §70405); IRC §129(a)(2) — dependent care credit rates, expense caps and $7,500 FSA limit, checked 8 October 2026.
- IRS — Tax year 2026 inflation adjustments (IR-2025-103) — standard deduction and brackets used in the worked example, checked 8 October 2026.