Image source: IRS.

The tax laws have a reputation for being slanted toward the rich, with high-income taxpayers often taking advantage of obscure provisions to reduce their tax bills substantially. However, even those who aren't anywhere near qualifying to be in the 1% can take advantage of many valuable tax deductions and credits. In particular, one tax break that's squarely aimed at families can help you save thousands on your tax bill. Let's take a closer look at the Child Tax Credit and the rules that govern whether you can claim it on your tax return.

How the Child Tax Credit works
Many tax credits involve complicated calculations, but the Child Tax Credit couldn't be simpler. For every eligible child in your family, you can claim a credit of $1,000. Because it's a credit, the tax break reduces your bill to the IRS on a dollar-for-dollar basis regardless of what tax bracket you're in.

In order to take the credit, the child in question must be 16 or younger at the end of the tax year for which you're claiming the break. The child must qualify as your dependent for tax purposes and must be related to you, opening the door not just for parents but also for grandparents, uncles and aunts, or even siblings to claim the credit. The child has to live with the person claiming the credit for more than half the year, and the taxpayer has to provide at least half of the financial support for the child during the year in question.

The Child Tax Credit has become an extremely popular provision, and one key reason is that it has expanded to allow some taxpayers to get a refund from the IRS even if they wouldn't otherwise owe taxes. The Additional Child Tax Credit is a related provision that provides what's known as a refundable credit to eligible taxpayers.

More than 22.5 million taxpayers claimed the Child Tax Credit in the most recent year for which the IRS has provided data, and those credits added up to more than $27.2 billion. Out of that group, 20.7 million taxpayers also qualified for the Additional Child Tax Credit, adding an extra $27.9 billion to the amount that taxpayers received. All told, the combined total of more than $55 billion worked out to an average of $2,442 for each taxpayer claiming the credit.

Cutting out high-income taxpayers
When you look more closely at the data, you'll find that about 69.2 million children qualified for the Child Tax Credit. That means that there's more than $14 billion unaccounted for, given the $1,000-per-child credit amount.

The primary explanation has to do with income levels. The Child Tax Credit phases out at certain income levels, as you can see in the chart below:

Filing Status

Child Tax Credit Phaseout Begins at This Income Level

Single, Head of Household, or Qualifying Widow(er)


Married Filing Jointly


Married Filing Separately


Data source: IRS.

If you earn more than the threshold amount, then your maximum credit for your family drops by $50. Earn enough income and you'll be shut out of the Child Tax Credit entirely.

In addition, some of those who would need to take advantage of the Additional Child Tax Credit to take full advantage of the provision don't meet the additional requirements involved. In particular, a taxpayer needs to have earned income from wages, salaries, or other sources adding up to at least $3,000.

Finally, as with most tax provisions, some taxpayers simply aren't aware that the credit exists. Even with thousands of dollars on the line, getting information to the taxpayers who need it the most can be extremely challenging, despite the best efforts of the IRS to get the word out.

For families struggling to make ends meet, a $1,000 tax break from the IRS can make a huge difference. If you have a qualifying child, make sure you claim your fair share of what the tax laws provide you as assistance to help you raise your family.