Source: The College Investor
Key Points
- 2025 Child Tax Credit: Families can claim $2,000 per qualifying dependent child, with $1,700 being refundable
- Adoption Credit Increases: The credit rises to $17,280, offering more assistance to adoptive parents in 2025.
- Earned Income Tax Credit Expands: The maximum credit is as high as $8,046, so more working families can receive increased benefits.
The IRS has announced updates to key family tax credits - such as the Child Tax Credit and Adoption Tax Credit, that will take effect in 2025 (for the 2025-2026 tax filing season).
From the refundable child tax credit to the adoption tax credit and Earned Income Tax Credit (EITC), these changes are set to impact household budgets, especially for lower income families that rely on these refundable tax credits.
Here’s a closer look at the adjustments that will shape financial planning for many families in the year ahead.
Child Tax Credit Remains The Same For 2025
For 2025, the Child Tax Credit (CTC) remains the same at $2,000 per dependent child. The refundable portion of the CTC also remains at $1,700.
This credit can be a lifeline for families looking to offset the rising costs of raising children, from school supplies to childcare. While the credit amount holds steady from 2024, the long-term future of the CTC remains uncertain, particularly as temporary expansions are set to expire in 2026.
In addition to the federal credit, 15 states and Washington, D.C., now offer their own versions of the CTC. These state-level credits can further reduce tax liabilities for eligible families. Taxpayers are encouraged to check with their state tax authorities to see if they qualify.
Adoption Tax Credit Rises
Families planning to adopt in 2025 will benefit from an increased adoption tax credit of $17,280, up from $16,810 in 2024. This non-refundable credit covers qualified adoption expenses, such as legal fees, travel, and adoption agency costs.
The amount you can claim depends on your Modified Adjusted Gross Income (MAGI), with phase-outs beginning at $259,190 and ending at $299,190. Families unable to use the full credit in one tax year can carry it forward for up to five years.
This adjustment, tied to inflation, reflects the government’s ongoing effort to support adoptive families.
Related: Tax Credit vs. Tax Deduction
Earned Income Tax Credit Has Modest Increase
The Earned Income Tax Credit (EITC), a critical benefit for working families with low to moderate incomes, will see slight increases in 2025. The maximum credit rises to $8,046 for households with three or more qualifying children, up from $7,830 in 2024.
Eligibility for the EITC depends on filing status, earned income, and the number of qualifying children. However, taxpayers with investment income exceeding $11,950 will be ineligible for the credit in 2025, a threshold that also increased slightly.
Here’s a breakdown of the maximum EITC amounts for 2025:
- No children: $649
- One child: $4,328
- Two children: $7,152
- Three or more children: $8,046
Families should also note that several states offer their own versions of the EITC, which can further increase the refund amount for eligible taxpayers. For example, California has the CalEITC, which can provide up to an additional $3,529.
Key Reminders
Families are encouraged to plan ahead to maximize the impact of these tax credits on their finances. Consulting a certified tax professional can provide information on eligibility and ensure all available credits are claimed. Also, families should look at maximizing their paycheck each month instead of relying on a large tax refund each year (or worse, a tax advance refund loan).
Additionally, the IRS’s Volunteer Income Tax Assistance (VITA) program offers free tax preparation services for qualifying families during tax season. Families can also look at free tax software to file their tax returns themselves to claim these credits.
With household budgets stretched thin by rising costs, these updated tax credits could offer much-needed relief for millions of families in 2025.
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Editor: Colin Graves
Robert Farrington is the founder of The College Investor and is widely recognized as one of the nation’s leading voices on student loan debt and saving for college. He holds an MBA from UC San Diego Rady School of Management and has spent over 15 years researching, writing, and advising on student loans, 529 plans, financial aid programs, and saving and investing for young professionals.
Robert has been featured in the The New York Times, The Wall Street Journal, The Washington Post, NBC News, and Forbes, where he has been a regular personal finance contributor for over a decade. His work combines both professional expertise and personal experience – he successfully navigated his own student loan repayment journey and has helped thousands of readers do the same.
He is committed to making the intersection of personal finance and education transparent and accessible. You can learn more about Robert on the About Page or on his personal site RobertFarrington.com.