{"id":510,"date":"2022-07-11T12:00:00","date_gmt":"2022-07-11T12:00:00","guid":{"rendered":"https:\/\/moneywithkatie.com\/traditional-roth-child-tax-credits\/"},"modified":"2025-09-05T16:45:46","modified_gmt":"2025-09-05T16:45:46","slug":"traditional-roth-child-tax-credits","status":"publish","type":"post","link":"https:\/\/moneywithkatie.com\/traditional-roth-child-tax-credits\/","title":{"rendered":"Does the Child Tax Credit Change the Traditional vs. Roth Calculus in 2025?"},"content":{"rendered":"
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Every once in a while I receive an email that makes me scratch my head. So for this week\u2019s post, I present to you:<\/p>\n

\u201cWe have 3 children under 18 and pay significantly less in taxes now than we will 12 years from now. This makes the tax savings from Traditional accounts less impactful during my \u2018child-rearing years.\u2019 I know with personal finance one can’t take every factor into account. However, I presume a respectable number of your readers will have a 17-year stretch in their investing lives that the math behind their taxes and the benefits of Traditional vs. Roth are significantly shifted. I wonder if you’ve considered this factor before and if it would change your analysis for someone grossing around $100,000 and qualifies for 1 or more child tax credits.\u201d<\/em><\/p>\n

At first glance, my gut reaction was, \u201cNo, probably not.\u201d Why? Because I\u2019d never seen anyone address it before\u2014even the big F.I. math guys who have multiple children themselves. <\/p>\n

But the more I thought about it (and then attempted to read about it), the more I realized it may call into question a broader theme: If you\u2019re getting tax credits for any reason <\/em>(including things like purchasing an electric vehicle and getting the $7,500 tax credit), whether for children or not, it\u2019s worth taking a second look.<\/strong><\/p>\n

And turns out, one of the most popular tax credits is for children\u2014the thing (sorry, should I not call children \u2018things\u2019?) that most people will have at some point in their lives.<\/p>\n<\/div>\n

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First, let\u2019s do a quick refresher on how tax credits work.<\/h2>\n

Y\u2019all know how I frequently get hot \u2018n bothered about the tax deductions<\/span><\/a> one can claim from making a pre-tax contribution to a 401(k)?  Well, a tax credit is like a tax deduction on speed.<\/p>\n

While a deduction<\/em> allows you to \u201celiminate\u201d income in the eyes of our Boiz at the IRS, a credit<\/em> is a direct refund of the tax you owe. <\/p>\n

For example: A $10,000 deduction would theoretically save someone in the 24% tax bracket about $2,400. A $10,000 tax credit would save someone $10,000, regardless of their bracket.<\/p>\n

In short: Tax credits are bae, because they directly lower your tax bill (while a deduction indirectly lowers it).<\/strong><\/p>\n

So what\u2019s the deal with child tax credits?<\/h3>\n

Here\u2019s the deal, my dudes: I spent three hours reading articles on IRS.gov, TurboTax, and more, and I still <\/em>had a hard time understanding exactly how the rules work (since each source seemed to have slightly different numbers, including discrepancies even within IRS documentation). Go figure.<\/p>\n

I assume the different articles were referencing different tax years, but all that to say, I\u2019ll link my sources where applicable. <\/p>\n

Here\u2019s the overall breakdown:<\/h3>\n

For 2025, you can get a tax credit worth up to $2,200 per child<\/a>, with the money distributed as a single end-of-year tax credit (basically, it\u2019ll reduce your tax bill by $2,200 per kid).<\/p>\n