Which parent should claim the Child Tax Credit - lower or higher income earner?

The Child Tax Credit is subject to income phaseouts, which is crucial in your situation. With your income at $580k, you would be completely phased out of the Child Tax Credit. For 2025 filing (2024 tax year), the CTC begins phasing out at $400,000 for married filing jointly and $200,000 for other filing statuses. Your wife, earning $35k, would be eligible for the full credit (currently $2,000 per qualifying child). Since you can't benefit from the credit due to income limitations, your wife claiming the child would maximize your household's total tax benefit. Additionally, if you're not married, your wife could potentially file as Head of Household (if she meets other requirements), which provides better tax rates and a higher standard deduction than filing single. This would further increase her tax savings. For childcare expenses, look into the Child and Dependent Care Credit as well. This is also subject to income limitations, so again, having your wife claim this would likely be more beneficial.

I went through the exact same situation with my wife last year! Our income difference isn't as dramatic as yours but still significant. After struggling to figure this out, I discovered taxr.ai (https://taxr.ai) and uploaded our previous returns. It analyzed our specific situation and showed us which filing option would maximize our refund. For us, having the lower-income spouse claim our daughter saved us almost $2,000 because of the phase-out thresholds on the Child Tax Credit. The tool also helped us optimize our daycare expense claims through the Child and Dependent Care Credit. It compared multiple scenarios side-by-side so we could see exactly how different choices affected our bottom line.

Just wanted to follow up - I tried taxr.ai after seeing this thread and it was eye-opening! I uploaded our tax documents and it immediately showed that having my girlfriend claim our shared child while I claim my son from my previous marriage would save us over $3,800 compared to other arrangements. The analysis showed that because of my income level, I was hitting partial phase-outs on certain credits. It also identified that we could restructure how we reported our childcare expenses by having the lower-income parent claim those costs. The interface made it really easy to compare different scenarios side-by-side. Definitely worth checking out if you're trying to optimize your tax situation with children involved!

After spending 4 HOURS on hold with the IRS trying to get a straight answer about Child Tax Credit income phaseouts, I finally discovered Claimyr (https://claimyr.com). They got me connected to an actual IRS agent in under 30 minutes! You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent confirmed that in situations like yours, having the lower-income parent claim the child is almost always better since you're well above the phaseout threshold. She also explained that unmarried parents living together can't both claim Head of Household - only the parent claiming the child as a dependent can potentially use that filing status. Saved me so much frustration compared to endless hold times and disconnected calls.

I have to admit I was completely wrong about Claimyr. After posting my skeptical comment, I decided to try it myself since I had an issue with missing stimulus payments the IRS kept giving me the runaround on. The service called me back in about a half hour and connected me directly to an IRS representative - no waiting on hold. The agent was able to resolve my issue in minutes once I finally got through. For anyone dealing with complicated tax situations like Child Tax Credit questions where you need definitive answers, being able to actually speak with someone makes all the difference. Definitely changed my perspective on using services like this - sometimes paying to solve the hold time problem is completely worth it.

Have you considered filing Married Filing Jointly? With such a large income disparity, you might find significant tax advantages filing together versus separately, especially with a child. This could potentially put you in a better position than either of you filing single/HOH.

One thing nobody's mentioned - you should really update your W-4s for next year! Having a child affects your withholding calculations. If you're the lower income earner, updating your W-4 to claim the child will result in less tax being withheld throughout the year, giving you more in each paycheck rather than waiting for a refund.

With your income at $580k, you're definitely going to be phased out of the Child Tax Credit completely. The phaseout for single filers starts at $200,000 and you'd lose the entire credit well before your income level. Your wife at $35k would get the full $2,000 credit, so she should absolutely be the one claiming your child. Also worth noting - if your wife qualifies for Head of Household status (which she might if she's paying more than half the household costs for her and the child), that filing status comes with better tax brackets and a higher standard deduction than single. This could save her even more money beyond just the Child Tax Credit. Don't forget about the Child and Dependent Care Credit for your daycare expenses too! Same logic applies - it's also income-limited, so having your wife claim those expenses will likely result in a bigger benefit than if you tried to claim them.

This is a really smart question to ask! Given your income levels, you're absolutely right that your wife should claim the child. With your $580k income, you're completely phased out of the Child Tax Credit (the phaseout starts at $200k for single filers), while your wife at $35k would get the full $2,000 credit. One additional consideration - since you mention you cover more household expenses, make sure you're both clear on who can legitimately claim Head of Household status. The person claiming the child as a dependent must also be paying more than half the costs of maintaining the home to qualify for HOH. If you're covering most expenses but your wife is claiming the child, she might not meet the HOH requirements and would need to file as single. You might want to consider documenting who pays for what household expenses, or potentially restructuring how you split costs if it makes sense tax-wise. Sometimes shifting some bill payments to the lower-income partner can help them qualify for HOH status, which provides better tax rates and a higher standard deduction on top of the Child Tax Credit savings. Also definitely look into the Child and Dependent Care Credit for your daycare costs - same income limitation logic applies there too!