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The Expansion of Child Tax Credits: A Financial Lifeline for Families

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Ethan Sulliva
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The Expansion of Child Tax Credits: A Financial Lifeline for Families

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Significant Expansion of Child and Family Tax Credits

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In an effort to provide financial relief to families struggling with high childcare costs, medical bills, and job loss, Massachusetts Gov. Maura Healey recently signed a tax relief package. This expansion of the child and family tax credit, a measure adopted by several states, aims to reduce child poverty and support working families. The credit values vary from state to state, but all are geared towards helping families thrive financially. The focus now is on raising awareness and ensuring that eligible families claim these benefits in 2024.

Efforts to Tackle Poverty Through Child Tax Credits

More states are undertaking initiatives to offer larger child tax credits in order to tackle poverty. Among these states are Massachusetts, Vermont, and New York, which have recently expanded or created their own permanent child tax credits. The eligibility and amount of these credits vary widely. Minnesota leads the pack, offering the country's largest credit of $1,750 for each child under 18. These expanded state-specific tax credits are inspired by the success of the federal child tax credit during the pandemic, which managed to cut child poverty in half. Advocates hope that these measures will help families do more than just survive, and they have received bipartisan support at the state level.

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Boosting Family Budgets Through Child Tax Credits

The past three years have seen a doubling in the number of states offering income tax credits to families with children. This comes after the federal child tax credit was expanded twice since 2017. Some states have expanded or introduced their own child tax credits to combat the rising cost of childcare and address concerns about slow growth in the workforce. As of this report's publication, fourteen states had permanent state child tax credits, with at least twelve states adopting or expanding the amount or eligibility for child tax credits from 2021 onwards. However, the potential downside to any tax cut is the formidable price tag.

Minnesota Offers Generous Child Tax Credits

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Minnesota stands out for its generous child tax credit, which, starting from the tax year 2023, offers $1,750 per qualifying child, without any limit on the number of children claimed. The credit phases out if your income exceeds $29,500 ($35,000 for Married Filing Jointly). Part-year residents and military members whose home of record is Minnesota are eligible for the credit. These credits take into account nontaxable combat zone pay as earned income.

Pennsylvania Expands Child Care Tax Credit

Pennsylvania has also expanded its child care tax credit, allowing families with children in childcare to claim 100% of the federal childcare tax credit they claimed. This expansion increases the maximum state credit for families earning $43,000 or less from $315 to $1,050 for one child, and from $630 to $2,100 for two children. For Pennsylvanians earning more than $43,000, the maximum tax credit increases from $180 to $600 for one child, and from $360 to $1,200 for two children. Despite these advances, the state still faces a shortage of childcare providers and centers.

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