In the 2nd half of 2021, the federal child tax credit extension from the pandemic era pulled millions of kids out of poverty. The rate of child poverty nearly quadrupled in 2022, wiping out the historic improvements that had been made, but Congress permitted it to come to an end at the very end of that year.
Child Tax Credit; Source- People
States Sending Child Tax Credit
Several states have started or increased their tax credits for children since the federal government enhancement came to an end. 6 states have added new child tax rebates (New Jersey, New Mexico, and Vermont in 2022, as well as Minnesota, Oregon, and Utah this year), and a further five have enhanced their current incentives. 14 states now provide child tax credits, and this year, proposals were submitted in several additional states. The federal child tax credit was temporarily increased by the American Rescue Plan Act in 2021, raising the maximum amount to $3,000 per kid between the ages of 6 and 17 and $3,600 for each child under the age of 6. Compared to the prior $2,000 per kid benefit, it was a huge increase.
Who Is Eligible For Child Tax Credit
About 6 out of 10 American families with kids received the credit as a result of the temporary expansion in monthly cash payments rather than a single after-tax payment. All families with a low or middle income earning less than 150 thousand dollars for married individuals ($112,500 for lone parents) are eligible for the full credit. Low-income income earners were not included in the earlier credit. After the payments started, the country’s child poverty rate decreased by 50%, reaching a record low of 5% in 2021, mostly as a result of the extended child tax credit. The increase helped raise 3 million children out of poverty. The majority of parents stated they utilized the credit payments for child care, rent, utilities, food, and school expenditures.
Who Is Not Qualified For Child Tax Credit
Although the extension of the tax credit provided by the government did help move kids out of impoverishment in the near term, some researchers contend that it might have had unfavorable long-term repercussions if made permanent. Families with low incomes are no longer eligible for the entire tax credit provided to middle-income families since qualification for the federal credit has been restored to its pre-pandemic rules. A married couple with two children must make at least $35,900 annually to be eligible for the full $2,000 child tax benefit; a single parent with two children would need to make $29,400.
Therefore, children whose parents make at or close to the $7.25 per hour federal minimum wage are not eligible for the maximum credit. Due to their parent’s income, about 25 percent of children countrywide aren’t eligible for the entire $2,000 credit. That comprises a third of children living in rural areas, half of children with a single parent, 40% of Black as well as Hispanic children, and 90% of children whose families make less than the federal poverty line, which for a family of four is around $30,000 annually.
