W-4 Dependents: The $2,200 and $500 Rules Explained
How claiming dependents on your W-4 reduces your withholding, and the exact numbers to use.
By the Easy Guides Editorial Team
What Step 3 does
Step 3 of the W-4 lets you claim the Child Tax Credit and Other Dependent Credit in advance, reducing your withholding throughout the year instead of waiting for a refund in April. It's optional, but if you have qualifying dependents and your income is below the threshold, skipping Step 3 means you're lending money to the IRS interest-free.
The income threshold
You can only complete Step 3 if your total annual income is under $200,000 (or $400,000 if you are married filing jointly). Above those amounts, the credits phase out and completing Step 3 would cause you to under-withhold.
The $2,200 rule for qualifying children
For each child who qualifies for the Child Tax Credit, you enter $2,200 in the first box of Step 3. A qualifying child must:
Where this comes from: One Big Beautiful Bill Act (2025), confirmed in IRS Rev. Proc. 2025-32, checked 2026-08-01 · IRC §24(h) as amended by P.L. 119-21 (OBBBA, 2025).
- Be under age 17 at the end of the tax year
- Be your child, stepchild, foster child, sibling, or a descendant of any of these
- Have lived with you for more than half the year
- Not have provided more than half of their own support
- Be a U.S. citizen, U.S. national, or U.S. resident alien
The $500 rule, other dependents
For each person who qualifies as a dependent but does NOT qualify for the $2,200 child credit, you enter $500 in the second box. This includes:
Where this comes from: One Big Beautiful Bill Act (2025), confirmed in IRS Rev. Proc. 2025-32, checked 2026-08-01 · IRC §24(h) as amended by P.L. 119-21 (OBBBA, 2025).
- Children age 17 or older (including college students)
- Elderly parents you support
- Other relatives you financially support who live with you
- Non-relatives who live with you all year and meet income and support tests
How to fill in Step 3
Add both amounts and enter the total on the Step 3 line.
2 × $2,200 = $4,400
1 × $500 = $500
Step 3 total: $4,900
What this actually does to your paycheck
The Step 3 amount is divided by the number of pay periods in the year and subtracted from your withholding each pay period. So a $4,500 Step 3 entry on a biweekly paycheck schedule ($4,500 ÷ 26 = ~$173) means approximately $173 less withheld each paycheck. You get that money now rather than as a refund in April.
Common questions
How much is the child tax credit on a W-4?
Step 3 of the W-4 counts $2,200 for each qualifying child under 17 and $500 for each other dependent. Your employer uses that total to withhold less tax from each paycheck. The credit itself gets settled when you file your return.
Where this comes from: One Big Beautiful Bill Act (2025), confirmed in IRS Rev. Proc. 2025-32, checked 2026-08-01 · IRC §24(h) as amended by P.L. 119-21 (OBBBA, 2025).
Do I have to claim my dependents on the W-4?
No. Step 3 is optional. If you skip it, more tax is withheld and you get the credit back as a refund when you file. Claiming them just moves the money into your paychecks during the year.
What if both spouses list the dependents on their W-4s?
Only one spouse should complete Step 3. If both of you claim the same kids, too little tax comes out of both paychecks and you can owe at filing time.