Child Tax Credit Income Phase-Out — When Your Credit Shrinks
The $2,000 Child Tax Credit doesn't disappear all at once. It shrinks gradually as your income rises — $50 for every $1,000 over the threshold. If you're wondering whether your raise or bonus pushed you past the line, here's exactly how the math works.
Check where you stand with the Child Tax Credit Calculator.
Phase-Out Thresholds
| Filing Status | Phase-Out Starts | Credit Fully Gone |
|---|---|---|
| Single / Head of Household | $200,000 AGI | $240,000 AGI |
| Married Filing Jointly | $400,000 AGI | $440,000 AGI |
| Married Filing Separately | $200,000 AGI | $220,000 AGI |
The reduction rate: $50 per $1,000 of AGI over the threshold. With one child ($2,000 credit), you lose the entire credit after $40,000 over the limit. With two children ($4,000 credit), it takes $80,000 over the limit to fully phase out.
Phase-Out Calculation Step by Step
Example — Married filing jointly, 2 children, AGI of $425,000:
- Subtract threshold from AGI: $425,000 − $400,000 = $25,000
- Divide by $1,000: $25,000 ÷ $1,000 = 25
- Multiply by $50: 25 × $50 = $1,250 reduction
- Subtract from total credit: $4,000 − $1,250 = $2,750 remaining credit
You still get $2,750 — not zero. The phase-out is gradual, not a cliff.
Common Questions About the Phase-Out
Does the phase-out apply to the refundable portion too?
Yes. The Additional Child Tax Credit (ACTC) — the refundable portion worth up to $1,700 — is calculated after the phase-out. If your credit drops to $1,500, the refundable portion can't exceed $1,500.
What income counts?
Adjusted Gross Income (AGI) on Line 11 of your 1040. That's gross income minus above-the-line deductions (401k contributions, HSA, student loan interest). It does NOT account for standard or itemized deductions.
Can I lower my AGI to avoid the phase-out?
Maximizing pre-tax contributions can help:
| Strategy | Potential AGI Reduction |
|---|---|
| Max out 401(k) | −$23,500 (2026) |
| HSA contribution (family) | −$8,550 (2026) |
| Traditional IRA (if eligible) | −$7,000 |
| Student loan interest deduction | −$2,500 |
A married couple maxing both 401(k)s and a family HSA could reduce AGI by over $55,000.
Phase-Out vs. Other Tax Credits
The CTC phase-out thresholds are unusually high compared to other credits:
| Credit | Phase-Out Starts (MFJ) |
|---|---|
| Child Tax Credit | $400,000 |
| Earned Income Tax Credit | $63,398 (3 children) |
| Child & Dependent Care Credit | Reduced above $125,000 |
| Education Credits (AOTC) | $160,000 |
Most families earning under $400,000 get the full CTC. The phase-out primarily affects high earners — which is why it's sometimes called the "millionaire phase-out" (even though it starts well below $1 million).
What If TCJA Expires?
The current $200,000/$400,000 thresholds were set by the 2017 Tax Cuts and Jobs Act. Before TCJA, the phase-out started at just $75,000 (single) and $110,000 (MFJ). If Congress doesn't extend these provisions, middle-income families could see their CTC shrink significantly. See how the TCJA sunset affects CTC for more.
Use the Federal Tax Calculator to see your total tax picture including all credits and deductions.
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