New study shows how child tax credit money directly benefited children


Lawmakers may still disagree on whether to maintain the new child tax credit benefits, but there is no argument that the money has been of great help to children across the country.

In recent months, the expanded child tax credit has helped millions of low to moderate income American families make ends meet. This money, which is issued monthly to bank accounts and mailboxes by the IRS, has been a vital lifeline for households with children who have been hit hard by the effects of the pandemic. But, that lifeline is expected to run dry very soon if lawmakers fail to come to an agreement on an extension of the program.

Without an extension, enhanced child tax credit benefits are expected to end in December. This means that only two more monthly tax credit payments are provided for qualifying households. But while the program is expected to end this year, there is still a possibility that lawmakers will agree to extend the program beyond 2021. A proposal to extend the new tax credit benefits has been included in the Build Back plan. Better from President Joe Biden, and lawmakers are currently debating whether this should happen or not.

If lawmakers fail to agree on an extension, it will be a huge blow to at-risk households, many of whom depend on monthly financial aid to help pay essential bills, like rent and food. In turn, this extra money reduced parents’ financial anxiety and lifted millions of children out of poverty. And parents don’t just use the money to pay rent – a new study shows that they are also using the extra money to cover children’s expenses. As we await the fate of the enhanced tax credit, here are three ways recent child tax credit payments have directly benefited children across the country.

1. Payments helped cover childcare costs

Child care is a common – but extremely expensive – expense for households with young children. About 55% of U.S. families spend at least $ 10,000 a year on child care – and thanks to closures, capacity limitations, and other changes related to the pandemic, childcare costs for some families have skyrocketed over the past two years. Fortunately, the tax credit money has helped at least some parents pay for this expense in recent months.

According to the new Household pulse survey According to the Census Bureau, about 1 in 4 households with young children – or about 26% – used the money to cover child care costs from early August through late September. This is a small but substantial increase from the end of July, when 1 in 5 families – or around 22% – spent money on child care.

2. The money was also used for school expenses

School-related expenses, like books, backpacks, and other supplies, can be quite expensive for families, especially low- and middle-income households with limited budgets. Parents had to spend a average of $ 529 per child on school supplies in 2020, despite many children learning at home in distant classrooms due to the pandemic. And, the costs of school spending were expected to rise this year thanks to rising inflation, which made consumer goods much more expensive.

Fortunately, these expenses have been a little easier to balance for many households this year thanks to the tax credit. According to new data from the study, 3 in 10 families who received the August and September tax credit payments spent at least some of the money on their children’s school expenses. This included books and supplies, tuition, after-school programs – excluding tutoring and childcare – and transportation to or from school.

And, it appears that the tax credit money has helped minority families with school-aged children in particular. By the end of September, about 4 in 10 black families – or about 42% – and about 3 in 10 Hispanic families – or about 31% – were using the money for school expenses. On the flip side, only about 1 in 4 non-Hispanic white families – or 26% – used the tax credit money for these types of expenses.

3. Children now live in households with less debt

As we have seen with previous spending trends, households still use at least a portion of recent tax credit payments to cover living expenses and household debt.

From late July to September, around half of households benefiting from the tax credit reported spending at least part of it on food. Another four in ten households said they spent money on their rent, mortgage or utilities, which helped alleviate some of the financial burden that these routine costs can place on parents across the country.

Another four in ten households said they used most of the money they received to repay their debts, reflecting the debt repayment trend seen in previous studies. That said, the new study also shows a slight increase in the number of households reporting that they “mainly spent” the money on debt.

According to the study, the number of households using the money to repay their debts rose by around 6%, from 27% earlier in the year to 33% at the end of September. This is further proof that households with children have been hit hardest by the pandemic – and that tax credit money has been essential in reducing hardship for children and adults in those households.


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