What happens to the Child Tax Credit as a taxpayer's income exceeds certain thresholds?

The Child Tax Credit phases out as a taxpayer's income exceeds certain thresholds. This means that as income rises beyond specified amounts, the maximum amount of the Child Tax Credit that a taxpayer can claim gradually decreases until it is no longer available. The thresholds for phase-out are based on filing status and adjusted gross income (AGI).

For example, for the tax year 2023, the phase-out begins when the taxpayer's AGI exceeds a certain level, and for each dollar above this threshold, the credit is reduced by a specific amount until it is completely phased out. Understanding this mechanism is crucial for taxpayers to anticipate their potential benefits based on earnings, as it impacts the overall tax liability and planning for tax credits.