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Receipt and Usage of Child Tax Credit Payments Among Low-Income Families: What We Know

Download PDF of the full policy brief

By Natasha Pilkauskas and Patrick Cooney

Introduction

In March, Congress passed the American Rescue Plan Act, which included a dramatic expansion of the Child Tax Credit (CTC). While the previous version of the Child Tax Credit was an important anti-poverty tool, families with low or no earnings did not qualify for the full credit, or any credit at all, blunting its potential impact. The expanded Child Tax Credit is much larger than the previous credit—worth $3,000 per child ages 6-17 and $3,600 per child under 6—and is available to all low-income families, even those with no earnings. In addition, half of this year’s CTC is being paid out in monthly installments, from July through December, essentially taking the form of a monthly child allowance we see in many other Western industrialized nations. Estimates suggest the expanded CTC could reduce child poverty in the United States by 49%, a historic achievement. Data collected from the U.S. Census Bureau’s Household Pulse Survey showed a 30% decline in food insufficiency for adults with children following the initial monthly payments and a 43% decline in food insufficiency for low-income households that received the initial payment. Researchers from Columbia University’s Center on Poverty and Social Policy estimate the first two monthly payments cut the child poverty rate by nearly 30%, keeping 3.5 million children out of poverty.

However, while the potential anti-poverty impact of the expanded CTC is extraordinary, we also know some families may face obstacles to receiving their payments. Due to low earnings, many low-income households do not traditionally file taxes, the primary way in which families are enrolled to receive the credit. In addition, tax-filing households may face other barriers to receiving their payments, due to residential instability or limited access to banking services.

To understand more about how the expanded CTC is impacting families and inform strategies to expand access to the credit, we partnered with Propel, the creators of Providers (formerly Fresh EBT), a free mobile application that helps over 5 million families manage their Supplemental Nutrition Assistance Program (SNAP) benefits. This brief discusses findings from two recent surveys with low-income families who use the Providers application, many of whom are eligible for the CTC. We found that while most respondents received the CTC and used it to pay for essential household expenses, a substantial share of CTC-eligible respondents did not received their first two monthly payments, suggesting more outreach and supports are needed to achieve universal receipt.

Key Findings

  • Only 2% of families with children reported not having heard of the CTC in both the August and September surveys.
  • Sixty-six percent of parents reported they received the CTC in July. This figure increased to 68% in August.
  • Few low-income families (1-2%) opted out of monthly payments, choosing instead to receive the credit as a lump sum in 2022, and approximately 15% of parents reported not getting it themselves but for reasons that do not raise concerns about access (e.g., the other parent claimed it or the credit is pending).
  • Roughly 13% of parents were unsure why they didn’t get the August payment or reported confusion about eligibility, a figure that was down from 19% for the July payment.
  • Parents with lower levels of education and those who are primarily Spanish speakers were most likely to report not having received the July or August payments.
  • The vast majority of respondents who received a CTC payment said they used the money to help pay for bills (75%) and/or other basic living expenses (like rent or food). Many reported using the money on child-related expenses like school supplies and children’s clothing.
  • Ninety-four percent of families said the credit was somewhat or very useful in helping them make ends meet, and 92% of parents say the CTC should continue post the pandemic.

Conclusion

This study offers an initial glimpse into the extent to which the expanded Child Tax Credit is reaching and improving the welfare of low-income families. The majority of families in our study received the July and August CTC payments and found them to be a great help. However, some families continue to report confusion around the process. Parents with limited English proficiency, as well as those with less education, report relatively low recipiency rates. Other research has found that recipiency rates decline with income, perhaps because those with less income are less likely to file taxes. And many parents report difficulty accessing the online tools meant to facilitate the process of registering with the IRS. These findings suggest policymakers should continue to pursue strategies that increase awareness of and support for accessing the CTC among those who are currently not receiving their payments. Future surveys will help us understand if more low-income families learn about and receive the CTC and how spending patterns change over time.

Download PDF of the full policy brief