Last week on Sept. 15, the third round of payments for the newly expanded federal Child Tax Credit (CTC) went out to millions of families with children across the country. The CTC is one of the nation’s key anti-poverty programs, and the American Rescue Plan Act made some important — but temporary — changes to the policy. It increased the amount of funding available to families, expanded eligibility by making the credit fully refundable, and changed the schedule for distributing the funds. Half of the funds are now distributed through monthly payments that began on July 15, rather than all payments being distributed in a lump sum when families file their taxes.
The expanded CTC is already leading to dramatic reductions in childhood poverty: Payments in July kept about 3 million children across the country out of poverty that month. To maximize the CTC’s impact in North Carolina, our state leaders must ensure that every eligible family receives the credit, while Congress needs to make these improvements to the CTC permanent.
Recent analysis from the Social Policy Institute explores how families in each state used Child Tax Credit payments. Families earning under $150,000 per year are eligible for monthly payments of $300 for each child under age 6 and $250 for children between the ages of 6 and 17. The Institute’s researchers found that the most common use for North Carolina families was buying food, followed by paying essential bills. Half of families reported using the funds to buy food, and nearly two out of five families said they paid bills. It’s not surprising then that families eligible for the CTC saw a decrease in severe food insecurity after monthly payments began. The share of families experiencing severe food insecurity dropped from 11 percent before payments went out down to 7 percent in the weeks after payments began.
Yet data also shows that families who need these funds the most — those with the lowest incomes — were the least likely to report getting the payment. Just over half of eligible families with annual incomes under $50,000 reported getting a CTC payment, compared with 70 percent of families with incomes between $100,000 and $150,000. That’s because families that weren’t required to file income tax returns in 2019 and 2020 may need to take extra steps to receive the monthly CTC payments. This includes many families with low incomes and mixed-status immigrant families.
There are an estimated 46,000 children in North Carolina families that are newly eligible for the CTC but did not file income tax returns in 2019 or 2020. Eligible families who are not yet receiving advance payments need to claim the CTC by using the IRS sign-up tool before November 15. Otherwise, they can receive one lump payment by filing a 2021 federal tax return in 2022.
Our state can help every eligible family get this powerful tool for reducing hardship by ensuring that every public agency is sharing information about the CTC, funding local community organizations to conduct outreach, and providing on-site tax filings at schools, Departments of Social Services, and health clinics.
The expansion of the Child Tax Credit is already increasing financial stability for North Carolina families, and this makes our communities and our state healthier and stronger. By getting this tax credit to as many families as possible and making the recent improvements permanent, the CTC can be a major steppingstone on our state’s path to economic recovery.
Logan Harris is a Senior Policy Analyst with the Budget & Tax Center.