The CTC is now bigger and better—permanently. The new also retains a special tax credit for non-child dependents.

After several temporary enhancements to the Child Tax Credit (CTC), the new One Big Beautiful Bill Act (the OBBBA) has made it official: The CTC is now bigger and better—permanently. The new also retains a special tax credit for non-child dependents.

Background: Prior to the Tax Cuts and Jobs Act (TCJA), the maximum credit that parents could claim for each qualifying child under age 17 was $1,000. The TCJA doubled the maximum credit to $2,000 for 2018 through 2025. Although the American Rescue Plan Act (ARPA) subsequently raised the maximum to $3,000 (plus an extra $600 for each qualifying child under age six), the rules reverted to the TCJA level after just one year—2021.

Initially, the refundable portion of the credit—officially called the Additional Child Tax Credit (ACTC)—was limited to $1,400 by the TCJA, but it was indexed for inflation. The refundable portion is $1,700 on 2025 returns.

To qualify for the CTC, a child must (1) reside with you for at least six months during the year, (2) not provide more than half of his or her own support and (3) be a U.S. citizen, national or resident alien. Furthermore, the TCJA requires you to provide the child’s name and Social Security number (SSN) on your return.

But the CTC is subject to a phase-out based on modified adjusted gross income (MAGI). Under the TCJA, the phase-out begins at $200,000 of MAGI for single filers and $400,000 for joint filers. (Temporary ARPA rules affecting the phase-out have also expired.)

Finally, the TCJA approved a $500 credit for each qualifying dependent you support, such as an elderly relative. The credit may be claimed for the following individuals.

Dependents of any age, including those who are age 18 or older.
Dependents who have SSNs or Individual Taxpayer Identification numbers (ITINs).
Dependent parents or other qualifying relatives supported by the taxpayer.
Dependents living with the taxpayer who aren’t related to the taxpayer.

This credit, which is not indexed, is also subject to a phase-out starting at the same MAGI thresholds as the CTC. It was set to expire after 2025.

New law impact: The OBBBA bumps up the maximum credit for the CTC with certain other favorable modifications.

For starters, the new law preserves a maximum CTC of $2,200 permanently, beginning on 2025 returns. So, the tax payoff is immediate. In addition, the credit will be indexed for inflation, beginning in 2026. This is the first time in nearly three decades that the CTC maximum will reflect rising costs.

The refundable portion of the credit remains at $1,700, but, unlike the regular CTC, the AFTC was already subject to inflation indexing.

The OBBBA also retains the existing TCJA phase-out thresholds going forward. These thresholds aren’t indexed for inflation and will remain the same, barring any further legislation. Plus, the credit for other dependents is extended beyond 2025 and made a permanent part of the tax code. It will remain at $500 without indexing, barring any further legislation.

In summary: The new law provides a lift to parents of young children and dependents they support. This is part of a package of tax law changes benefitting families. Check to see if your clients have any questions.