The Internal Revenue Service released Revenue Procedure 2025-32, detailing the inflation-adjusted tax brackets, standard deductions, and key credits for the 2026 tax year.

The updates - shaped by the One, Big, Beautiful Bill Act (OBBBA) signed into law in July 2025 - will influence how millions of Americans calculate their 2026 tax returns.

Among the most significant changes: the Child Tax Credit, now made permanent and set at $2,200 per qualifying child, with up to $1,700 refundable. The new law ties the credit to inflation, helping preserve its value as living costs rise - a benefit expected to reach more than 40 million families.

The credit provides a tax break for households with qualifying children, and many families may be eligible even if they don't normally file a tax return.

"Under OBBBA, the credit will be adjusted for inflation moving forward, which should keep the credit's value aligned with cost-of-living increases," said Robert Westley, senior vice president with Northern Trust.

Ben Henry-Moreland, a senior financial planning nerd with Kitces.com, noted in his review of OBBBA that this indexing marks a historic shift: "Section 70104 of OBBBA permanently increases the credit to $2,200 beginning in 2025," he wrote.

"Additionally, the credit will be indexed to inflation beginning in 2026, marking the first time in the Child Tax Credit's nearly three-decade history that it will automatically increase with the cost of living."

Henry-Moreland also points out that while the main Child Tax Credit is increasing, the refundable portion - known as the Additional Child Tax Credit - is not. "The additional child tax credit remains at $1,700 for 2025," he said.

"Unlike the standard credit, however, the refundable credit was already indexed to inflation, so it will increase in line with the standard credit going forward."

He adds that the OBBBA preserves the existing phase-out thresholds established under the Tax Cuts and Jobs Act. "Households with modified adjusted gross income over $200,000 (single and head-of-household) or $400,000 (joint) will have the credit phase out by $50 for every $1,000 of income above those limits. These thresholds are not indexed to inflation and will remain fixed unless changed by future legislation."

Kassi Fetters, a certified financial planner with Artica Financial Services, said families should understand how those income thresholds affect their eligibility. In addition, she noted eight criteria each child must meet for that child to qualify for the $2,200 credit.

You can claim the Child Tax Credit for each qualifying child who has a Social Security number that is valid for employment in the United States.

To be a qualifying child for the tax year, your dependent generally must:

Jean-Luc Bourdon, wealth adviser with Lucent Wealth Planning, notes that the qualifying child's Social Security number rule hasn't changed. Each child must still have a work-eligible Social Security number issued by the return's due date to count for the Child Tax Credit.

What's new, Bourdon said, is a filer requirement. Beginning with 2025 returns, the taxpayer must have a Social Security number issued by the due date to claim the Child Tax Credit (including the refundable additional child tax credit).

If you file married filing jointly, at least one spouse must have a Social Security number (the other may have a Individual Taxpayer Identification number [ITIN] issued by the due date).

If neither spouse has a Social Security number, you can't claim the Child Tax Credit/Additional Child Tax Credit, though you may still be eligible for the $500 Credit for Other Dependents if you otherwise meet the rules.

Important: Children who turn 17 during 2026 do not qualify for the Child Tax Credit (though they may qualify for the $500 Credit for Other Dependents).

The distinction between refundable and nonrefundable credits is one of the most confusing -- but important -- aspects of the Child Tax Credit.

Nonrefundable credit:

* Can only reduce your tax liability to $0.

* Cannot create a refund beyond what you paid in.

* Example: If you owe $1,500 in taxes and have a $2,200 nonrefundable credit, you'd get $1,500 back (reducing tax to $0), but the extra $700 disappears.

Refundable credit:

* Can reduce your tax liability below $0.

* The government sends you money, even if you paid no taxes.

* Example: If you owe $0 in taxes and have a $1,700 refundable credit, you'd receive a $1,700 refund check.

You can claim the Child Tax Credit by entering your children and other dependents on Form 1040, U.S. Individual Income Tax Return and attaching a completed Schedule 8812, Credits for Qualifying Children and Other Dependents.

The IRS's draft 2025 Instructions for Schedule 8812 is out, but always check the final posted version for any last-minute edits.

If you qualify for the Child Tax Credit, you may also qualify for these tax credits:

You may qualify for the credit for other dependents for a child or dependent who is not a "qualifying child" for purposes of the Child Tax Credit.

Use the Interactive Tax Assistant to see if you're eligible to claim the Child Tax Credit, Additional Child Tax Credit or Credit for Other Dependents.

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