What’s Changing in 2026: The TCJA Sunset

The Tax Cuts and Jobs Act of 2017 temporarily doubled the child tax credit from $1,000 to $2,000 per qualifying child and raised the income phase-out thresholds dramatically. Those provisions expire after December 31, 2025.

For tax year 2026 (returns filed in 2027), the credit reverts to pre-TCJA levels unless new legislation extends or modifies it. That means:

• Credit amount: $1,000 per qualifying child (down from $2,000), per IRC Section 24(a)
• Phase-out thresholds: Revert to much lower pre-TCJA levels
• Qualifying child age: Under 17 (this stays the same)
• $500 credit for other dependents: Goes away entirely

That’s a $1,000 per child tax increase for every family that was claiming the full credit. A household with three kids under 17 loses $3,000 in credits. For a family in the 22% bracket, that’s the equivalent of adding roughly $13,600 in taxable income.

2026 Income Phase-Out Thresholds by Filing Status

Under the reverted pre-TCJA rules, the child tax credit begins to phase out at these modified adjusted gross income (MAGI) levels, as specified in IRC Section 24(b):

• Married filing jointly: $110,000
• Single or head of household: $75,000
• Married filing separately: $55,000

Compare that to the TCJA thresholds that applied through 2025: $400,000 for married filing jointly and $200,000 for all other statuses. The drop is dramatic. A married couple earning $150,000 claimed the full child tax credit in 2025 with no phase-out at all. In 2026, their credit is already partially phased out.

These are the numbers as the law currently stands. There’s a real chance Congress modifies them — extending the higher thresholds, adjusting the credit amount, or creating something entirely new. But planning on the assumption that Congress will act is risky. We’d rather have clients prepared for the worst and pleasantly surprised than the reverse.

How the Phase-Out Math Works

The child tax credit phases out at a rate of $50 for every $1,000 (or fraction of $1,000) by which your MAGI exceeds the threshold for your filing status.

Here’s an example. A married couple filing jointly with two qualifying children has MAGI of $130,000 in 2026. Their base credit is $2,000 ($1,000 per child). Their income exceeds the $110,000 threshold by $20,000. The reduction: ($20,000 / $1,000) x $50 = $1,000. Their credit drops from $2,000 to $1,000.

Another example: a single parent with one child earning $95,000. The threshold is $75,000. Excess income: $20,000. Reduction: $1,000. The $1,000 base credit is wiped out entirely. No child tax credit at all.

That single parent would have received the full $2,000 credit in 2025 (threshold was $200,000). In 2026, the credit vanishes completely. Same income, same kid, $2,000 less in tax relief.

The phase-out rate of $50 per $1,000 means the credit completely disappears once your income exceeds the threshold by $20,000 per child (for the $1,000 credit). For one child, that’s $130,000 MFJ or $95,000 single. For two children, the credit survives until $150,000 MFJ or $115,000 single.

Qualifying Child Requirements: A Quick Refresher

The child must meet all of these tests to qualify for the credit, as outlined in IRC Section 152 and IRS Publication 972:

• Age: Under 17 at the end of the tax year. A child who turns 17 on December 31, 2026, does not qualify for 2026.
• Relationship: Your son, daughter, stepchild, foster child, sibling, step-sibling, or a descendant of any of these (grandchild, niece, nephew).
• Residency: Lived with you for more than half the tax year. Temporary absences for school, medical care, or vacation count as time lived with you.
• Support: The child didn’t provide more than half of their own support during the year.
• Citizenship: Must be a U.S. citizen, U.S. national, or U.S. resident alien with a valid Social Security number issued before the return’s due date.
• Joint return: The child didn’t file a joint return for the year (unless filed only to claim a refund).

The Social Security number requirement is strict. An ITIN doesn’t qualify for the child tax credit — though a child with an ITIN may qualify the parent for the $500 credit for other dependents (which, again, goes away in 2026 under the TCJA sunset).

The Refundable Portion: Additional Child Tax Credit (ACTC)

Not everyone who qualifies for the child tax credit has enough tax liability to use the full credit. If your tax bill is $600 and your credit is $1,000, the basic CTC can only reduce your tax to zero — you don’t get the remaining $400 as a refund (the CTC is nonrefundable up to that point).

That’s where the Additional Child Tax Credit (ACTC) comes in, calculated on Schedule 8812. Under the reverted 2026 rules, the refundable portion is calculated as 15% of your earned income above $3,000, up to the unused portion of the credit, per IRC Section 24(d). If you earned $15,000, the calculation is: ($15,000 – $3,000) x 15% = $1,800. But the refundable amount can’t exceed the unused credit, so if your unused credit is $400, you get $400 as a refund.

Under the TCJA (2018-2025), the refundable portion was up to $1,700 per child. Under the reverted rules, there’s no hard cap on the refundable portion — it’s based on the 15%-of-earned-income calculation. But since the credit itself is only $1,000, the maximum refundable amount is $1,000 per child in practice.

For very low-income families, the earned income threshold of $3,000 means you need at least that much in earned income to receive any refundable credit. A parent with $2,000 in earned income gets nothing from the ACTC, even if they have three qualifying children.

How the CTC Interacts With the Earned Income Credit

Families near the lower end of the income spectrum often qualify for both the child tax credit and the earned income tax credit (EITC). These two credits work independently — claiming one doesn’t reduce the other. But they interact with your overall tax picture in ways that matter for planning.

The EITC is fully refundable, so it can generate a refund even if you owe no tax. The CTC is partially refundable (through the ACTC). Together, they can mean thousands of dollars in refunds for working families with children.

Here’s the tension for families in the middle: the EITC phases out as income rises (the phase-out range for a married couple with three kids ends around $63,398 in 2025), while the CTC phases out at different thresholds. In 2026, with the CTC phase-out dropping to $110,000 MFJ, there’s a wider gap where families earn too much for the EITC but are starting to lose the CTC too. That’s a real squeeze on households earning $75,000 to $130,000.

Planning Strategies for Families Near the Phase-Out

If your income is close to the phase-out threshold, small moves can save real money:

Max out retirement contributions. Traditional 401(k) and IRA contributions reduce your MAGI. A married couple earning $125,000 who each contribute $23,500 to their 401(k)s brings their MAGI down to $78,000 — well below the $110,000 threshold. That preserves the full CTC. The same money going to a Roth 401(k) doesn’t reduce MAGI and wouldn’t help.

HSA contributions. If you’re on a high-deductible health plan, HSA contributions reduce MAGI. The 2026 family limit is expected to be around $8,550. Every dollar in the HSA is a dollar off your MAGI.

Consider timing of capital gains. If you’re planning to sell investments, the year you recognize the gain matters. Pushing a stock sale from 2026 to 2027 (or pulling it into 2025 while the higher thresholds still apply) could preserve thousands in CTC. See our capital gains tax guide for more on gain timing.

Self-employed? Watch your deductions. Business deductions reduce your AGI. A self-employed parent who invests in equipment (hello, Section 179) reduces their MAGI and may keep more of the child tax credit. The timing of large business expenses matters more in 2026 than it did under the higher TCJA thresholds.

What If Congress Extends the TCJA?

There’s significant political pressure to extend the $2,000 credit and the higher phase-out thresholds. Both parties have proposed various versions of an extension, expansion, or modification. Some proposals would increase the credit to $2,500 or $3,000. Others would lower the eligibility age or change the refundability rules.

We’re not going to predict what Congress does. What we will say is this: don’t build your 2026 tax plan around legislation that hasn’t passed yet. Plan for the law as written. If Congress extends the credit, great — you’ll owe less than expected. If they don’t, you won’t be scrambling in January 2027 to figure out why your refund is smaller.

We’ll update this page and our 2026 tax brackets guide as soon as any legislation becomes law. You may also want to review the alternative minimum tax and estate tax exemption pages for other TCJA sunset impacts.

Sources & References

• 26 U.S.C. § 24 — Child Tax Credit (Cornell Law Institute)
• IRS — Child Tax Credit Overview
• 26 U.S.C. § 152 — Dependent Defined (Cornell Law Institute)
• IRS — Schedule 8812 (Credits for Qualifying Children)
• IRS — EITC Income Limits and Tables
• IRS Publication 972 — Child Tax Credit
• IRS — 401(k) Contribution Limits
• IRS Publication 969 — Health Savings Accounts
• Tax Cuts and Jobs Act of 2017 (Congress.gov)