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The credit is a maximum of $1,000 per qualifying child.

A qualifying child is an individual under the age of 17 for whom you can claim a dependency exemption and deduction and who is your child or other direct descendent, or a stepchild or eligible foster child. Although you must be entitled to a dependency deduction for the child, that deduction isn't reduced or otherwise modified because of the child tax credit.

The credit is phased-out for certain higher income taxpayers. Specifically, the amount of the credit allowable is reduced by $50 for each $1,000 (or part of $1,000) of modified adjusted gross income (generally, the dollar amount shown on the last line of page 1 of your individual income tax return) above a threshold amount, i.e., $110,000 on a joint return, $75,000 for single filers and heads of household, and $55,000 for married individuals who file separate returns. This means, for example, that when the maximum credit is $1,000, a married couple filing jointly who have one qualifying child are entitled to a credit of $950 if their modified adjusted gross income is more than $110,000 but not more than $111,000. They lose the credit completely if their modified adjusted gross income is more than $121,000.

If the otherwise allowable child tax credit is more than the amount of income tax you owe, the excess may be refunded subject to certain limitations.

The credit is scheduled to be reduced to $500 per child after 2010.