If you are a parent, caregiver, or supporting loved ones at home, recent tax changes under the One Big Beautiful Bill Act (OBBBA) could mean greater savings come tax season. This legislation makes permanent many of the temporary benefits introduced under the 2017 Tax Cuts and Jobs Act (TCJA), while also increasing some key credit amounts.

Child Tax Credit (CTC)

Under the TCJA, the Child Tax Credit temporarily doubled to $2,000 per qualifying child. It also increased the refundable portion of the CTC, referred to as the Additional Child Tax Credit (ACTC), to $1,400. Additional changes included lowering the qualifying income amount to $2,500 and increasing the phaseout threshold for married taxpayers filing jointly (MFJ) with modified adjusted gross income (MAGI) of $400,000 ($200,000 for all other filers).

Although these changes were expected to sunset at the end of 2025, the passing of the OBBBA has made them permanent and even expanded them further. Effective for the 2025 and 2026 tax years, the amount of credit has increased from $2,000 to $2,200, with the ACTC also increasing to $1,700. Taxpayers can expect these amounts to be indexed for inflation thereafter. Despite the increase to the CTC and ACTC, the total credit phaseout amount remains fixed at MAGI of $400,000 for MFJ taxpayers and $200,000 for all other filers.

To claim these credits, your qualified child must have a valid Social Security number issued before the due date of your tax return (including extensions). If you leave this out or make an error, the IRS will treat it as a mathematical error, meaning your credit will be denied automatically—no audit, no appeal. Click here to determine if your child qualifies.

Other Dependent Credit (ODC)

The TCJA also introduced the Other Dependent Credit, a $500 nonrefundable credit to taxpayers with dependents who did not qualify for the standard Child Tax Credit. This applied to older children (over age 17), elderly parents, and other qualifying relatives, including those with an ITIN instead of a Social Security number. Similar to the Child Tax Credit, the ODC was temporary and set to expire after 2025.

Under the OBBBA, the credit has now been made permanent, providing continued support for families with non-child dependents. The credit remains $500 per qualifying dependent, and the individual must meet the IRS relationship and support tests. As with the CTC, if you omit the correct identifying number, the IRS will treat it as a mathematical error and deny the credit without further review.

The credit is reduced by $50 for each $1,000 (or fraction thereof) your MAGI exceeds $400,000 for joint filers or $200,000 for other filers. It is also important to note that you cannot claim both the Child Tax Credit and the Other Dependent Credit for the same individual.

This credit can offer meaningful relief for families supporting older children, elderly parents, or other loved ones who depend on them.

Child and Dependent Care Credit (CDCC)

The Child and Dependent Care Credit (CDCC) provides relief for taxpayers who pay for childcare or care of another qualifying individual so that they (and their spouse, if filing jointly) can go to work. The TCJA allowed taxpayers to claim up to 35% of qualifying care expenses, with a limit of $3,000 for one child or $6,000 for two or more children. The maximum credit percentage is reduced by one percentage point for each $2,000 of the taxpayer’s adjusted gross income, or fraction thereof, over $15,000. The credit rate is 20 percent for a taxpayer with AGI greater than $43,000.

The OBBBA makes a significant and permanent enhancement to the credit. For tax years beginning after 2025, the maximum credit rate increases from 35% to 50% of qualifying expenses. The credit limits of $3,000 for one child and $6,000 for two or more remain unchanged, but the 15% increase in qualified expenses enables taxpayers to reach the maximum credits at a lower total out-of-pocket cost. Taxpayers with an AGI of $15,000 or less can receive the maximum credit of 50%. As income increases beyond that amount, the credit percentage gradually phases down, reaching 35% for those with an AGI between $43,001 and $75,000 (or $86,001 to $150,000 for married couples filing jointly). For taxpayers with an AGI above $75,000 ($150,000 if filing jointly), the credit percentage continues to decrease until it reaches the minimum rate of 20%, which applies once AGI exceeds $105,000 ($210,000 for joint filers).

Click here to see if your child and dependent care expenses qualify for the credit.

Key Considerations

To make sure you’re fully prepared to claim these credits, verify that your dependents’ Social Security Numbers or Individual Taxpayer Identification Numbers are valid and up to date. It’s also important to maintain accurate records of all daycare and dependent care expenses throughout the year, as proper documentation will be essential when filing your return.

Please feel free to reach out to any of our tax professionals with questions about claiming the credits at 703.385.8888, and follow our newsletter for the latest tax updates.