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Phase Out

The credit phases out for taxpayers with “modified adjusted gross income” above certain non-inflation indexed thresholds and applies to the child tax credit and the other dependent credit.    

Child & Dependent Tax Credits Phaseout Thresholds

09.02.03 Child:Dependent Tax Credits 2025

Phase-Out Computation

The credit is reduced by $50 for each $1,000 (or fraction of $1,000) of modified AGI over the thresholds.

Modified AGI

“Modified AGI” is AGI increased by amounts excluded from gross income under Code Sections 911, 931, or 933 (the foreign exclusions).

Example - Phase Out of Regular Child Tax Credit - In 2025, Don and Mallory, a married couple, have an AGI of $402,001.  They had no foreign income exclusions.  They have on child eligible for the child credit.

-
Modified AGi $402,001
Threshold, Married Joint Taxpayers $400,000
Net Difference $2,001
(A) Divide Net Difference by $1,000 (round up to next whole number) 3
(B) Maximum credit per child $2,200
(C) Multiply (A) by $50 $150
Subtract (C) from (B) $2,050

Don and Mallory get a maximum $2,050 child tax credit.  Notice that modified AGI just $1 above an even $1,000 mark caused this couple to pay $50 additional tax.

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