Child Tax Credit, ACTC and ODC Rules for 2025 Returns and Beyond

If you prepare individual returns, you already know the child tax credit (CTC) is not just another line on a tax form. It is one of the most powerful family tax benefits and one of the fastest ways to build client trust when you can explain what is happening and why.

It is also one of the most common sources of errors and rejected returns.

The IRS describes the child tax credit as a nonrefundable credit that helps families with qualifying children reduce their tax liability. However, the IRS also explains that a portion of the credit may become refundable through the additional child tax credit (ACTC) when the CTC exceeds the taxpayer’s tax liability. For taxpayers whose dependents do not qualify for the CTC, the IRS notes that the credit for other dependents (ODC) is a separate, nonrefundable credit that may apply.

Nonrefundable does not always mean “no refund”

The term "nonrefundable" can be misleading to clients. Many taxpayers assume that if they qualify for the child tax credit, they will receive the full credit amount back as cash. That is not how the base CTC works. The child tax credit reduces tax liability but does not automatically create a refund.

The ACTC can become refundable for some taxpayers. A portion of the child tax credit may be refundable for eligible taxpayers, as an additional child tax credit, under certain income requirements and circumstances.

This is one of the most important conversations you can have with family clients during the 2025 filing season. Understanding when the ACTC applies helps you set accurate refund expectations and reduce follow-up calls or rework.

SSN rules under OBBBA

If there is one eligibility issue that can turn into a costly mistake, it is the Social Security number requirement. To claim the child tax credit, you (or your spouse if filing jointly) and each qualifying child must have a Social Security number that is valid for employment and issued before the due date of the return, including extensions.

This requirement comes up in real practice more often than many tax pros expect, especially with clients who have:

• Newly issued Social Security numbers
• ITINs
• Mixed-status households
• Shared custody situations

Calculating Child Tax Credits, NATP’s Feb. 10 or on-demand webinar, also addresses new rules introduced in OBBBA, including an SSN requirement tied to the taxpayer claiming the credit and the extension of the increased credit. For many tax practices, that means updating intake checklists and documentation requests.

Who qualifies for CTC: Why the details still matter

Most tax pros can list the CTC eligibility rules from memory but applying them consistently during the busiest part of the season is the challenge. According to the IRS, a qualifying child must meet multiple criteria, including age, relationship, residency and dependent status.

Even one missed requirement can change the credit outcome, shift the taxpayer to the ODC or eliminate eligibility entirely. Those are the moments that cause client confusion and increase the chance of IRS correspondence later.

When the child does not qualify: ODC can still help

A dependent who does not qualify for the child tax credit does not always mean the taxpayer is out of options. The credit for other dependents is available for dependents who do not qualify for the CTC. As a nonrefundable credit, ODC can apply to a broader range of dependents.

This is especially common for:

• Older dependents who are age 17 or older
• Dependents who meet dependency rules but not CTC rules
• Qualifying relatives such as parents or other family members
• Multigenerational households

If you prepare returns with older dependents or caregiving households, the ODC can be an important part of maximizing the client’s tax benefits while staying compliant.

Why this matters for tax pros nationwide

The child tax credit is one of the most-searched-for credits during filing season and impacts tax practices across the country.  If you prepare returns for families, this topic is not optional. 

That is why NATP’s Calculating Child Tax Credits webinar (Feb. 10 or on-demand) is designed to be clear, practical and immediately usable. This session demonstrates the calculation and application of the CTC, shows when taxpayers are eligible for the refundable ACTC and explains when the ODC is the correct benefit instead.