What Income Is Too High for the Child Tax Credit? The Real Numbers for 2025

The Child Tax Credit doesn't disappear the moment you hit a certain income. It phases out gradually—and the thresholds are higher than most people realize. Many families assume they don't qualify when they actually do.

For 2025, the income limits where the credit starts reducing are $200,000 for single filers and $400,000 for married couples filing jointly. Above those numbers, the credit shrinks by $50 for every $1,000 of additional income.

This guide breaks down exactly how the phase-out works, what you'll actually receive at different income levels, and strategies to maximize your credit even at higher incomes.

2025 Child Tax Credit Quick Reference

How the Phase-Out Actually Works

The Child Tax Credit uses a gradual reduction system rather than a hard cutoff. Once your modified adjusted gross income exceeds the threshold—$200,000 single or $400,000 married filing jointly—your credit decreases by $50 for every $1,000 you earn above that line. This means the credit doesn't vanish at $200,001; it just gets slightly smaller.

Here's the math in action. A married couple with two children earning $420,000 is $20,000 over the threshold. That's 20 increments of $1,000, so their credit reduces by $1,000 (20 × $50). Their maximum credit drops from $4,000 to $3,000. Still a meaningful tax benefit—just not the full amount.

The credit fully phases out at approximately $240,000 for single filers with one child and $440,000 for married couples with one child. Add $40,000 for each additional qualifying child since each child adds another $2,000 credit that needs to phase out. A married couple with three kids wouldn't lose the credit entirely until about $520,000 in income.

Calculating Your Exact Credit Amount

Start with your maximum potential credit: $2,000 multiplied by qualifying children under 17. Then calculate how far your AGI exceeds the threshold. Divide that excess by $1,000, rounding up to the nearest whole number. Multiply that number by $50. Subtract the result from your maximum credit. That's your actual Child Tax Credit.

For example: single parent, two kids, $230,000 AGI. Maximum credit is $4,000. Excess over threshold is $30,000. That's 30 increments, times $50 equals $1,500 reduction. Final credit: $4,000 minus $1,500 equals $2,500. The credit doesn't disappear—it's reduced but still substantial.

Expert tip from Elizabeth Bokan, Acting Director: "I see families every year who assume they earn too much and don't even claim the credit. Run the numbers yourself or with a tax professional. A $1,500 credit you thought you couldn't get is still $1,500 in your pocket."

What Counts as Income for the Child Tax Credit

The IRS uses Modified Adjusted Gross Income (MAGI) for Child Tax Credit phase-outs. For most families, MAGI equals AGI—the number on line 11 of your Form 1040. However, if you have foreign earned income exclusion, foreign housing exclusion, or income from Puerto Rico or American Samoa, you'll need to add those back.

All earned income counts: wages, salaries, tips, self-employment income. Investment income counts: dividends, capital gains, rental income, interest. Retirement distributions count as income too. Social Security benefits count if taxable. The only things that don't count are truly non-taxable items like child support received or certain disability payments.

Income Sources Included in MAGI Calculation

• Wages, salaries, bonuses, and commissions from employment
• Self-employment net income after deductions
• Capital gains from stock sales, real estate, or other investments
• Rental property income and royalties
• IRA and 401(k) distributions
• Taxable Social Security benefits and pension income

Strategies to Maximize Your Credit Near the Phase-Out

If your income hovers near the phase-out threshold, strategic timing can preserve more credit. Defer income when possible—delay a year-end bonus to January, hold off selling appreciated stock until the next tax year, or time large retirement distributions to spread across multiple years. Every $1,000 you can shift to a different year saves $50 in credit.

Maximize above-the-line deductions to lower AGI. Traditional IRA contributions reduce AGI dollar-for-dollar up to $7,000 (or $8,000 if you're 50+). Health Savings Account contributions do the same—$4,150 for individuals, $8,300 for families in 2025. Self-employed? Your SEP-IRA or solo 401(k) contributions can shelter substantial income.

Filing status matters significantly. The married filing jointly threshold is double the single filer threshold—$400,000 versus $200,000. For some couples, particularly those with disparate incomes, married filing jointly provides substantial Child Tax Credit advantages even if other calculations favor separate filing.

The Refundable Portion: Additional Child Tax Credit

The Child Tax Credit has two components: a non-refundable portion that reduces taxes owed, and a refundable portion called the Additional Child Tax Credit (ACTC) that can result in a refund even if you owe no taxes. For 2025, up to $1,700 per child is potentially refundable.

The refundable portion calculation requires earned income of at least $2,500. The ACTC equals 15% of earned income above $2,500, up to the maximum refundable amount. A family with $20,000 in earned income gets 15% of $17,500 ($20,000 minus $2,500), equaling $2,625 maximum ACTC—though the actual amount depends on their total credit and tax liability.

High-income families affected by the phase-out typically don't need to worry about refundability—their tax liability exceeds their credit anyway. The refundable portion primarily benefits lower and middle-income families whose tax bills are smaller than their credit amount. But understanding both pieces helps you calculate your actual benefit accurately.

Child Tax Credit at Various Income Levels (Married Filing Jointly, 2 Children)

Common Misconceptions About CTC Income Limits

The biggest misconception: confusing the Child Tax Credit with the expanded 2021 credit. During the pandemic, temporary legislation increased the credit to $3,000-$3,600 per child with much lower income phase-outs starting at $75,000 single and $150,000 married. That expansion expired. The current $200,000/$400,000 thresholds are far more generous than what existed temporarily.

Another misconception: thinking the credit is all-or-nothing. The gradual phase-out means partial credits are common and valuable. A family earning $450,000 with three children still receives $2,500 in credits. That's not nothing—it's real money that reduces their tax bill.

Some families mistakenly believe investment income disqualifies them. Investment income counts toward AGI but doesn't disqualify you from the credit—it just affects where you land relative to the threshold. A family with $350,000 in wages and $50,000 in capital gains has $400,000 AGI, right at the married threshold, and still qualifies for the full credit.

Planning Ahead: What May Change

The current Child Tax Credit structure expires after 2025 unless Congress extends it. Under current law, the credit drops to $1,000 per child in 2026, and the phase-out thresholds revert to $75,000 single and $110,000 married. This would dramatically change who qualifies and how much they receive.

Children aging out of eligibility is the most predictable change. The credit requires children to be under 17 at year-end. A child turning 17 in December loses eligibility for that entire tax year. Families with teenagers approaching the cutoff should factor this into tax projections and potentially accelerate income into years when the credit still applies.