Characteristics of Children Getting Less Than the Full Federal Child Tax Credit

• In Event: Economic Mobility and Family Systems: Policy, Wealth, and Inequality

Abstract

Introduction: The Child Tax Credit is a significant source of financial support for many families but has a structural flaw that gives families with the most need the least support. Last year’s megabill increased the maximum credit amount from $2,000 to $2,200 but made no changes to the structure of the credit, leaving more than 19 million children under age 17 in families with low and moderate incomes getting less than the full credit. Additionally, the megabill ended eligibility for the Child Tax Credit for children who are U.S. citizens or have a lawful immigration status unless at least one of their parents has a Social Security number, affecting roughly 2.7 million children by one estimate. At the same time, rising prices from tariffs and other factors hit families with low incomes the hardest. The combination of policy changes and affordability challenges make it critical to understand who the children are who are not fully benefiting from this important financial resource. Purpose: Our goal is to better understand the children who receive less than the full federal Child Tax Credit, including their demographics and geographic distribution, to highlight the large share of children affected and identify differential impacts depending on the children’s characteristics. Methods: We examine children under 17 in families that lack earnings or have earnings that are too low to receive the maximum Child Tax Credit of $2,200 per child, focusing on those who meet the megabill’s requirement that children and at least one parent have a Social Security number.We start with a Tax Policy Center (TPC) national estimate of children who get less than the full Child Tax Credit for tax year 2026. We allocate it by geographic and demographic characteristics based on our analysis of American Community Survey data for 2022-2024, using 2026 tax parameters and incomes adjusted to 2026 projected levels. We use February 2026 Congressional Budget Office projections to adjust income for inflation through 2026 and further adjust earnings and rental, interest, and dividend income for real growth. Results: Our preliminary results show that the 19 million children under 17 who get less than the full Child Tax Credit include more than half of Black children, more than 1 in 3 Native American children and Latino children, roughly 1 in 5 white children, and more than 1 in 6 Asian children. Overall, more than 1 in 4 children get less than the full credit. In 10 states, more than one-third of the population of children gets less than the full credit, and in four states—Mississippi, Louisiana, New Mexico, and West Virginia, the share is greater than 40 percent. Our analysis will cover these and other findings. Conclusion: Our analysis explores a central flaw in the current Child Tax Credit’s design. Policymakers should address this flaw as families face challenges meeting basic needs, especially in the face of rising prices, prioritizing children who currently get less than the full credit in future legislation.

Author

• Stephanie Hingtgen, Center on Budget and Policy Priorities
  Presenting Author