Child Tax Credit 2027 — Refundable vs Non-Refundable Split

How the 2027 Child Tax Credit splits between refundable and non-refundable

The federal Child Tax Credit (CTC) provides $2,000 per qualifying child under age 17 for tax year 2027. Part of the credit is non-refundable — it can only reduce your federal income tax liability to zero. The remainder, up to $1,700 per child for 2027, is refundable as the Additional Child Tax Credit (ACTC). If your tax liability is already zero, you can still receive the refundable portion as a cash refund.

The refundable ACTC is limited to 15% of your earned income above $2,500. That earned-income floor means very low-income filers with little or no wages cannot claim the full refundable amount. A single parent with two children but only $5,000 of earned income can claim a maximum ACTC of (5,000 − 2,500) × 15% = $375 total, regardless of the $3,400 maximum cap.

Order of credit application

For the calculation, start with your tax liability before any CTC. Apply the non-refundable CTC first to reduce tax liability down toward zero — this is the "tax-offset" portion. The remaining unused CTC (up to $1,700 per child) then becomes the ACTC, subject to the 15% earned-income test. The Credit for Other Dependents (ODC) of $500 per non-child dependent (e.g., parents, adult relatives) is purely non-refundable — it cannot become a refund.

Example: Single parent, two kids under 17, tax liability $3,200, earned income $35,000. Max CTC = $4,000 ($2,000 × 2). Non-refundable portion absorbs the full $3,200 liability, leaving $800 unused. ACTC cap is $3,400 ($1,700 × 2) — the smaller of the leftover $800 and (35,000 − 2,500) × 15% = $4,875 is $800. So the filer receives $3,200 in tax offset + $800 as refund = $4,000 total CTC, with no remaining ODC.

2027 phase-out and OBBB context

Both the non-refundable and refundable portions of the CTC phase out for higher-income filers. The phase-out begins at $200,000 AGI for single/HoH filers and $400,000 AGI for married filing jointly. For every $1,000 (or fraction) of AGI over the threshold, the total CTC is reduced by $50. A married couple with three kids and AGI of $450,000 has total CTC of $2,000 × 3 = $6,000, reduced by ($450,000 − $400,000) / $1,000 × $50 = $2,500. Final credit: $3,500.

The 2021 American Rescue Plan briefly expanded the CTC to $3,600 (under 6) / $3,000 (6–17) and made the whole credit fully refundable. That expansion expired after 2021. OBBB did not restore it — the structure remains the 2018 TCJA $2,000 design, with $1,700 refundable for 2026 and $1,700 for 2027 after inflation indexing. Several Congressional proposals to expand CTC are pending but not enacted.

Source: irs.gov — Publication 972 and Schedule 8812 instructions. Updated May 2026 reflecting OBBB (P.L. 119-21) inflation indexing for 2027.

Why Part of the Child Tax Credit Is Refundable and Part Is Not

The Child Tax Credit is split into two pieces that behave in opposite ways, and that split is the reason two families with the same number of children receive different money. The non-refundable piece can only erase income tax you actually owe: once your tax liability reaches zero the remainder of that piece has nothing left to offset and simply disappears. The refundable piece, claimed as the Additional Child Tax Credit, is paid out beyond your liability, but it is limited by a formula based on earned income above a threshold rather than by your family size, so it phases in as you earn more instead of being available in full from the first dollar. That combination produces the outcome that surprises people most: a household with very low earned income can qualify for children and still receive less than a household earning more, because neither piece has anything to work with. Filing status, the child's age and Social Security number, and the higher-income phase-out all sit on top of that. The IRS sets out current rules and thresholds on its Child Tax Credit page. Updated September 2026.

Why the Refundable Portion Depends on Your Earned Income

The split this calculator produces is not arbitrary — the refundable piece is capped by what you earned. The Additional Child Tax Credit is computed as a percentage of earned income above a floor, which is why a family with little or no wage income can qualify for a child but still receive little or nothing back. The non-refundable portion behaves in the opposite direction: it can only reduce tax you actually owe to zero, so a household whose liability is already wiped out by other credits gets no further benefit from it, and the value spills into the refundable calculation instead. This is the mechanic behind the most common complaint about the credit — that two families with the same number of children receive very different amounts. Enter your earned income above rather than your total income, because investment income, unemployment compensation and most retirement distributions do not count toward the earned-income test. Source: IRS — Child Tax Credit. Updated 2026-09-18.

Social Security Number and Residency Tests for Each Child

Every qualifying child must have a Social Security number valid for employment, issued before the return's due date including extensions — an ITIN does not qualify a child for the credit, and obtaining the SSN after you file does not rescue the claim for that year. The child must also be under the age limit at the end of the tax year, be your dependant, and have lived with you for more than half the year, with specific exceptions for temporary absences such as school, medical care and military service. Divorced and separated parents cannot split one child between them: the credit follows whoever properly claims the child as a dependant for that year, which is settled by the residency test or by a signed Form 8332 releasing the claim. Filing first does not win a contested claim — the IRS applies the tie-breaker rules and will bill the other parent back. Source: IRS — Child Tax Credit. Updated 2026-09-18.