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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.

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, a necessary prerequisite 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 a recent survey (Aug. 1-13) with low-income families who use the Providers application, the vast majority 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 have not received 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 early August.
  • Sixty-five percent of parents reported that they had received the CTC. Another 10% 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).
  • However, nearly 20% of parents were unsure why they didn’t get the credit or reported confusion as to whether they were eligible.
  • Parents with low levels of education and Hispanic families (especially those who are primarily Spanish speakers) are less likely to have filed taxes, less aware of the CTC, and most likely to report not having received the CTC.
  • The vast majority of respondents who received a CTC payment (96%) said they used the money to help pay for bills and/or other basic living expenses (like rent or food). Another 37% said they spent money on child related expenses like school supplies and children’s clothing.
  • Ninety-three percent of families said the credit was somewhat or very useful in helping them make ends meet and 91% 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 (65%) received the July CTC payment and found it to be a great help. However, a substantial share of families did not receive their first payment and report confusion around the process. Hispanic parents, and particularly those 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