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How the new child tax credit impacts Utah parents

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Posted at 9:03 PM, Mar 13, 2021
and last updated 2021-03-14 00:31:03-05

SALT LAKE CITY — With the largest average family size in the country, Utah families will see quite a bit of extra money in their pockets this year from the expansion of the child tax credit. The expansion was passed as part of the $1.9 trillion COVID-19 relief bill signed into law by President Joe Biden on Thursday.

"It's really one of the biggest steps forward in reducing child poverty," said Matthew Weinstein, director of fiscal policy at Voices for Utah Children.

Under the expansion, single parents making less than $75,000 and joint filers making less than $150,000 per year will receive a tax credit of $3,000 per child, with no cap on the number of children per family. The benefit is even larger for children under the age of six at $3,600 per child.

This is an increase from the previous amount of $2,000*.

"Just the child tax credit by itself could reduce child poverty by almost 50 percent," Weinstein said.

This is good news for Utah families, which on average are 19 percent larger than the average American family. Utahns under the age of 18 make up 29 percent of the state's population, according to the latest data from the U.S. Census Bureau.

For example, a family of four making less than $150,000 with two children under the age of six would receive $7,200 in financial assistance.

"It especially makes the biggest difference for families in poverty, for kids growing up below the poverty line," Weinstein said, adding that Utah's minority populations will see the biggest impact from the expansion. "Among white children, the poverty rate is around 7 percent. Among Latino children, it's more than double that around 16 percent, and so to be able to reduce that rate and reduce those majority-minority gaps is huge."

The credit is refundable, meaning more low-income families will receive the full benefit even if they owe no income taxes. Previously, a single parent would not qualify for the credit unless they were making at least $12,000 per year.

"That doesn't sound like much to most people, but if you're working part-time, minimum wage, single mom, you wouldn't qualify for the full child tax credit, but now you will," Weinstein said. "The full $2,000 — well, now $3,000 dollars or $3,600 for younger kids — will be available to all kids."

In addition, the credit can be paid out on a monthly basis, with parents receiving up to $300 per child every month. This means parents won't have to wait for annual lump sum benefit when they file their taxes. Weinstein said the credit — which will cut national child poverty rates by nearly 50 percent — can be viewed as an investment in future generations.

"There is so much research out there that demonstrates that when you do that, those kids end up being much more likely to graduate from high school, much more likely to get the healthcare that they need growing up, and then they end up earning more as adults and having higher workforce participation themselves," he said.

Families can use the monthly payments for whatever they need — whether that be subsidizing rent, food expenses, childcare or educational costs, to name a few examples.

Weinstein said the expansion of the child tax credit will bring an estimated $1.2 billion to Utah families this year.

*This article previously stated that parents would receive an extra $3,000. It has been corrected to clarify that it is an increase from the previous amount of $2,000, not $3,000 on top of that.