State child tax credits, like the federal child tax credit, can have a positive impact on a child’s health, education, and even future earnings. (See prior blog post.)
Illinois House and Senate members introduced legislation this year in the Illinois General Assembly to establish state child tax credits (SB 1444 and HB 3950). The bills, identical, would have created a maximum credit of $700 per child in households with reported income of $75,000 for joint tax filers or $50,000 for other tax filers. Beyond those thresholds, the value of the credit reduces by $24 for each additional $1,000 in income. However, neither bill made it out of its respective chamber.
Yet, several other states were successful in their efforts to create or expand state child tax credits. To date, 14 states have adopted state child tax credits (some are effective in future years). All but three of the state credits are refundable, meaning a taxpayer may receive a refund from the state if the value of the credit exceeds the amount the taxpayer owes to the state.
Below is a review of the activity seen around the country:
The state established a refundable child tax credit with a maximum value of $1,750 for each qualifying child under the age of 18. Effective next year (for payment of 2023 taxes), the maximum credit is available for children in households where joint tax filers make less than $35,000 or less than $29,500 for all other filers.
The state established a refundable credit with a maximum value of $1,000 for each qualifying child up to the age of six. Effective next year (for payment of 2023 taxes), the maximum credit is available to households with reported incomes of under $25,000.
The state established a non-refundable tax credit of $1,000 for each qualifying child aged 1-3. Effective next year (for payment of 2023 taxes), the maximum credit thresholds (after which the credit begins to phase out) are $54,000 for joint tax filers, $43,000 for single or head of household filers, and $27,000 for single filers.
Effective next year (for payment of 2023 taxes), approved legislation increases the state’s child tax credit for the lowest three income levels from $175 to $600, $150 to $400, and $125 to $200. The maximum value credit applies to households reporting income of less than $25,000.
Prior to action this year, the state’s child tax credit was available to children aged 4-17. With this year’s action by the state, the credit will now include children under the age of 4. Eligibility thresholds are $110,000 for joint tax filers, $75,000 for single filers, and $55,000 if married filing separately. The value of the credit is the greater of 33% of the portion of the taxpayer’s federal child tax credit or additional child tax credit attributable to qualifying children or $100 multiplied by the number of qualifying children.
The state doubled the value of its refundable child tax credit to $1,000. The credit applies to children five or younger. The maximum credit value is available to households with reported income of $30,000 or less.
Previously the state’s $500 child tax credit was available to taxpayers making $6,000 or less with children under 17 with a disability. The state has now expanded availability to individuals making $15,000 or less and for children under the age of six.
Arizona Governor Katie Hobbs signed a new one-time Child Tax Rebate that provides eligible families $250 per child up to three dependents.
Sources for post: Center on Budget and Policy Priorities, Institute on Taxation and Economic Policy, Tax Credits for Working Families, The Rockefeller Foundation and various news media reports.