Family
The child tax credit and Trump accounts
A $2,200 credit per child under 17, a Social Security number rule that trips up some families, and a $1,000 government deposit for children born 2025 through 2028 that only arrives if a parent asks for it on the return.
The child tax credit is the biggest single tax break most families with children get, and after the 2025 law it is permanent and indexed for inflation. The same law created an investment account for children under 18, seeded with $1,000 of federal money for children born from 2025 through 2028. The credit arrives automatically if the return is prepared right. The deposit does not.
Who is a qualifying child
The credit uses the same definition of a child as the rest of the tax code, with one extra condition: age.
Relationship. Your son, daughter, stepchild, foster child placed by an agency or court, brother, sister, stepsibling, half-sibling, or a descendant of any of them, such as a grandchild or a niece.
Age. Under 17 at the end of the year. A child who turns 17 on December 31 does not qualify for that year. This is stricter than the dependent rules, which reach older teenagers and students.
Residence and support. The child lived with you more than half the year, did not pay more than half of their own support, is a U.S. citizen, national or resident, and is claimed as your dependent.
Social Security number. The child must have an SSN that is valid for employment, issued before the return’s due date. A child with an ITIN cannot get this credit. Starting with 2025 returns, at least one parent claiming the credit must also have an SSN.
If the child fails only the age test, or has an ITIN instead of an SSN, the $500 credit for other dependents usually applies instead. The full dependent rules and the tie-breakers when two people could claim the same child are in Who counts as a dependent.
How much, and how it phases out
| Credit per qualifying child under 17 | $2,200 |
| Refundable portion per child (the “additional child tax credit”) | up to $1,700 |
| Credit for other dependents (17 and older, parents, ITIN children) | $500 |
| Phase-out begins, single or head of household | $200,000 |
| Phase-out begins, married filing jointly | $400,000 |
| Reduction above the line | $50 per $1,000 |
The $2,200 is indexed for inflation from here on; the $500 and the phase-out thresholds are not. Both credits are figured on Schedule 8812.
The credit first reduces the tax you owe. If it brings your tax to zero with credit left over, up to $1,700 per child can come back to you as a refund. That refundable part is figured from earned income, 15% of earnings above $2,500 (verify), so a family with very little earned income gets little or none of it. The $500 credit for other dependents only reduces tax; it is never refunded.
Worked example: three families, two children each
| Family A | Family B | Family C | |
|---|---|---|---|
| Children under 17 with valid SSNs | 2 | 2 | 2 |
| Earned income | $38,000 | $95,000 | $430,000 (joint) |
| Tax before the credit | $1,100 | $6,800 | $84,000 |
| Credit before any phase-out | $4,400 | $4,400 | $4,400 |
| Phase-out ($50 per $1,000 over $400,000) | — | — | −$1,500 |
| Used against tax | $1,100 | $4,400 | $2,900 |
| Refunded (up to $1,700 per child, limited by earnings) | $3,300 | $0 | $0 |
| Total benefit | $4,400 | $4,400 | $2,900 |
Family A: the credit wipes out the tax and $3,300 of the remainder is refundable, within the $3,400 cap for two children and well within 15% of earnings over $2,500. Family B: the credit is fully used against tax, so nothing is refunded and nothing is lost. Family C: $30,000 over the line costs $1,500 of credit. The thresholds are not indexed, so each year’s raises push more families toward them.
Behind the scenes
Every Social Security number on a return is matched against Social Security’s records when the return is filed. A card that says “Not valid for employment” disqualifies the child from the $2,200 credit even though the child is a legitimate dependent. A careful preparer checks the card, not just the number, because a return that claims the wrong credit is either rejected or quietly reduced by the IRS months later, with a letter, and the letter is harder to answer than the card was to read.
Divorced and separated parents
For tax purposes the child lives with one parent, and the credit follows the child. The parent the child lived with for more nights during the year is the custodial parent and claims the child, whatever the divorce decree says. A decree binds the parents; it does not bind the IRS.
The custodial parent can let the other parent claim the child by signing Form 8332, a release for one year or a stated set of years. The non-custodial parent attaches it to their return and gets the child tax credit. What they do not get is head of household status, the earned income credit, or the dependent care credit; those stay with the parent the child lives with and cannot be released.
If both parents claim the same child, the second return filed is rejected and the IRS sorts out the duplicate claim with letters to both households. That takes months. Signing the form in advance is far easier.
Trump accounts
Created by the 2025 law. Part savings plan, part government deposit, and new enough that some details are still being worked out.
What it is. An investment account for any child under 18 who is a U.S. citizen with a Social Security number. The money is invested in low-cost U.S. stock index funds; the law does not allow other choices. The account belongs to the child, and in general nothing comes out until the child turns 18.
The $1,000 deposit. Children born in 2025, 2026, 2027 or 2028 can receive a one-time $1,000 deposit from the federal government. It is not automatic. A parent must elect it on Form 4547, filed with the tax return, or through the Treasury’s website. If a child was born in the window, claim it; there is no catch in the law as written, and $1,000 invested at birth has a long time to grow.
Contributions. Contributions became possible on July 4, 2026. Parents, grandparents and anyone else can add up to $5,000 a year per child in total. An employer may contribute up to $2,500 of that $5,000 as a benefit, and the employer’s contribution is excluded from the parent’s income. Contributions from family are made with money that has already been taxed; there is no deduction for putting money in.
At 18. The account converts to something that works like a traditional IRA (verify). Growth was never taxed year by year; how withdrawals are taxed after 18, and what penalties apply to early ones, follow IRA-style rules the IRS was still filling in as of this writing.
What is still unclear. Which institutions will offer the accounts and what they will charge; how the deposit arrives if the election is made late; and how Colorado will treat the account. Changes will be noted on the updates page.
Worked comparison: where the next $1,000 should go
A Colorado family with a toddler has $1,000 to put away each year and three accounts to choose from. The free $1,000 deposit is worth taking in every case; this is about the family’s own money.
| Trump account | CollegeInvest 529 | Roth IRA (child with a job) | |
|---|---|---|---|
| Tax break going in | None federally; Colorado treatment unsettled | Colorado deduction, worth about $44 per $1,000 at 4.40% | None |
| Growth taxed each year | No | No | No |
| Coming out | Taxed like a traditional IRA after 18, as the law reads today | Tax-free for education; penalty otherwise, with a $35,000 lifetime rollover to a Roth as a fallback (verify) | Tax-free in retirement; contributions can come out any time |
| Requires | Child under 18 with an SSN | Nothing | Earned income of the child |
| Best for | The $1,000 deposit and employer contributions | Money that is for school | A teenager with a W-2 |
The Colorado side
Colorado starts from federal taxable income and taxes it at a flat 4.40%, so the federal credit itself does not change the Colorado return. Colorado has its own, separate child tax credit for lower-income families with children under 6, with income limits; a family with modest income should have it checked every year. Colorado has not said how it will treat Trump accounts. Because the state starts from federal taxable income, the likely answer is that it follows the federal treatment unless the legislature acts.
What to bring your preparer
- Each child’s Social Security card, or a clear photo of it, so the “valid for employment” question is settled by reading, not guessing
- Dates of birth for every child, including a newborn born late in the year
- For a child born 2025 or later: the child’s SSN, so Form 4547 can be filed with the return
- If you are divorced or separated: a signed Form 8332 if the other parent is claiming the child this year, or a count of the nights the child spent with you if there is any dispute
- Any Trump account statements once accounts exist, and any employer contribution shown on the W-2
- For a modest-income family: nothing extra, but mention children under 6 so the Colorado credit is checked
Questions people ask
My child turned 17 in November. Do I still get the $2,200?
No. The child must be under 17 at the end of the year. You get the $500 credit for other dependents instead, as long as the child is still your dependent.
I owe no tax. Can I still get the credit?
Part of it. Up to $1,700 per child is refundable, depending on your earned income. The remaining $500 per child, and the $500 credit for other dependents, only offset tax you owe.
We had a baby on December 30. Does the baby count for the whole year?
Yes. A child born at any point in the year, who lived with you for the rest of it, is treated as having lived with you all year. The baby needs an SSN before the return is filed; apply at the hospital or through Social Security as soon as you can, and file an extension if the number has not arrived by April 15 rather than filing without it.
Is the Trump account deposit taxable?
The $1,000 goes into the account, not to you, and is not income to you. Growth inside the account is not taxed year by year. What happens when the money comes out after 18 follows IRA-style rules the IRS is still filling in.
Can I claim my grandchild?
Yes, if the grandchild lived with you more than half the year and no parent with a higher claim is claiming the child. Grandparents raising grandchildren get the full $2,200.
My spouse has an ITIN. Do we lose the credit?
Not if you have an SSN and the child does. The rule since 2025 is that at least one parent claiming the credit must have an SSN. If neither parent has one, the credit is not available even for a child who does.
Two things to check before the return is filed
That every child’s Social Security card says nothing about employment restrictions, and that Form 4547 is attached for any child born in 2025 or later. The first protects the $2,200; the second claims the $1,000.