Definition
A federal tax credit for each qualifying child, generally under age 17, that reduces your tax bill dollar for dollar rather than merely reducing taxable income. The credit amount, income phase-outs, and refundable portion are set by Congress and change over time.
Why it matters
Credits beat deductions: a credit is subtracted straight from the tax owed. For parents it is often the single largest line lowering the family's bill, and the phase-outs make household income worth watching near the thresholds.
Example
A couple with two qualifying children owes $6,500 of federal tax before credits. The child tax credit reduces that bill directly for each child, and if credits push the bill below zero, the refundable portion can still arrive as a refund.
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.