Child Tax Credit Impact Varies

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Child Tax Credit Impact Varies

Special Report - June 8, 2010
A new report from the Tax Foundation found that family savings from the federal child tax credit vary significantly from state to state. The $1,000 tax credit is available to heads of household “for each dependent child under the age of 17.” The May 20th report, “Tax Savings from Child Tax Credit Vary Significantly from State to State,” attributes the variation between states to two primary causes. First, some states simply have families with more children. These traditionally include states with high Hispanic or Mormon populations. This fact also explains why states like New York and the District of Columbia with “high rates of single households” and Florida with a more elderly population tend to be toward the bottom of the list. Secondly, the “child tax credit begins to phase out for families making over $110,000.” Consequently, high-income states, like those in the Northeast, have fewer families who qualify for the full tax credit.

While North Carolina ranked 16th in the percentage of tax returns that claimed the child tax credit—18.9 percent—the amount of the average North Carolina credit ranked much lower at 32nd with an average credit of $214. That amount is compared to the highest average credit in Utah—$342—and the lowest average credit in D.C.—$104. Utah and D.C. also posted the highest (23.7 percent) and lowest (10.7 percent) of tax returns claiming the child tax credit, respectively.

Some years ago, the child tax credit was increased from $500 to $1,000 per child. That amount is scheduled to revert back to the $500 level at the end of the year “as part of the general expiration of the Bush tax cuts.” Such a reversion would disproportionately hurt states that rank near the top of the list, and have little effect on states at the bottom.