Family Tax Credits

In 2026, there are some changes to the credits related to families and children, most notably the Child Tax Credit and the Child and Dependent Care Tax Credit. These credits include a phase-out structure based on certain income thresholds.

THE CHILD TAX CREDIT

For 2026, the amount is $2,200 per qualifying child. In the future, under OBBBA, the credit amount will be adjusted annually for inflation. The credit phases out for higher- income taxpayers, starting at $400,000 for couples filing jointly and $200,000 for single filers. The phase-out reduces the credit amount by 5% for every dollar earned above these thresholds.

CHILD AND DEPENDENT CARE TAX CREDIT

OBBBA introduced two key changes to the Child Dependent Care Tax Credit that take effect in 2026. The tax credit calculation increased from 35% to 50% of qualifying dependent care expenses. Also, there's a new phase-out structure with two tiers based on adjusted gross income (AGI).

In the first tier, the credit percentage is reduced by 1% for each $2,000 of AGI over $15,000. The rate cannot be reduced below 35% in this phase.

In the second tier, for AGIs above $75,000 ($150,000 for joint filers), the percentage is further reduced by 1% for each $2,000 ($4,000 for joint filers) over that threshold. The floor remains at 20%. The qualifying dependent care expense cap remains $3,000 for one child and $6,000 for two or more dependents