Accessing the Child Tax Credit: Insights from American Parents
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The Child Tax Credit (CTC) provides critical financial support to millions of American families by offsetting the high cost of raising children. While Congress has expanded the CTC numerous times with the support of each administration since its enactment in 1997—most recently through the 2017 Tax Cuts and Jobs Act and 2021 American Rescue Plan Act—its future continues to be a topic of debate. Understanding parents’ experience with and perception of the credit is vital to ensuring that any policy changes optimize the CTC and effectively support American families.
BPC and Morning Consult conducted a survey of 1,500 parents1 from February 17-22, 2022, to measure awareness of and familiarity with the CTC, understand reactions to temporary changes to the credit for 2021, and identify areas for improving its administration to increase accessibility. This survey expands on BPC’s 2021 report, “How to Sensibly and Permanently Expand the Child Tax Credit and Earned Income Tax Credit,” with key findings highlighted below.
1. The CTC expansion for tax year 2021 significantly impacted families’ finances, and parents continue to feel the effects of the end of monthly CTC payments.
The American Rescue Plan Act (ARP), a broad pandemic relief bill, significantly expanded the CTC for tax year 2021. For one year only, the ARP increased the maximum credit amount to $3,000, introduced a larger credit of up to $3,600 for children ages 5 or younger, raised the maximum age of qualifying children to 17, and eliminated the CTC’s refundability cap and its phase-in, making it fully available to low-income families regardless of earnings. The law also introduced the option for families to receive the CTC monthly instead of in full at tax filing time, with half of the 2021 credit paid out in installments from July to December 2021. For tax year 2022, the CTC has reverted to its previous form, unless Congress takes further action this year.
Nearly two-thirds (63%) of parents who qualified for the CTC in 2021 said that the credit had a large or somewhat large impact on their family’s finances. Low-income parents, Black and Hispanic parents, younger parents, and parents in larger households were particularly likely to report that the CTC had a large impact.
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Figure 1: How large an impact, if any, did the Child Tax Credit have on your family’s finances over the past year?
Note: Figures may not add to 100% due to rounding.
Most parents who received monthly payments of the CTC during the latter half of 2021 reported spending the credit on basic expenses. Fifty-three percent of respondents used the CTC to pay for food, and nearly half (44%) spent a portion of the credit on clothing. Other top spending categories included utilities and telecommunications, schoolbooks and supplies, rent, and childcare.
Figure 2: Which of the following, if any, describe how you used the money that you received from the monthly Child Tax Credit payment(s)?
Perhaps not surprisingly, many parents reduced their spending in response to the expiration of monthly CTC payments, with food (35%) and clothing (33%) among the top items. Parents also reduced their spending on utilities and telecommunications and transportation and were less likely to pay down debt or save or emergencies. Fewer than a quarter of parents (23%) indicated that neither their spending nor saving was meaningfully affected by the expiration of monthly CTC payments.
Figure 3: Has the expiration of the monthly Child Tax Credit payments after December 2021 caused you to reduce your spending on any of the following?
2. While awareness of the CTC is high, administrative challenges prevent some parents from accessing it.
Nearly all parents (87%) said that they are very or somewhat familiar with the CTC. White parents were most likely to be at least somewhat familiar (90%), while Black parents were most likely to be very familiar with the credit (58%). Additionally, high- (93%) and middle-income (90%) parents were more likely to report being familiar with the CTC than were low-income (83%) parents.
Figure 4: How familiar are you, if at all, with the Child Tax Credit?
Note: Numbers may not add to 100% due to rounding.
This high degree of familiarity, however, does not necessarily translate into claiming the CTC. Approximately three-quarters of parents reported ever claiming it before—substantially lower than the percentage who are familiar with the CTC. Those who did not say they claimed the credit break down as follows: 8% of parents said that their child has been claimed by another taxpayer, while 10% reported never qualifying to claim the CTC, and 9% were unsure if they previously claimed the credit.
Notable income and racial disparities exist in current claim rates. Although 84% of high-income parents (annual household income over $100,000) reported claiming the credit, only 77% of middle-income (annual household income of $50,000-$100,000) and 66% of low-income parents (annual household income below $50,000) have done so. While the claiming rate among low-income households can be partially explained by the credit’s phase-in with earnings prior to 2021, it does not explain the difference between high- and middle-income parents. Administrative hurdles likely also depress claiming rates for low- and middle-income families.
Responses to questions about the 2021 version of the CTC demonstrate that some taxpayers lacked understanding of the credit’s temporary expansion and could have benefited from broader or better-targeted outreach at the local, state, or federal levels. Upon learning additional information about the 2021 changes to the CTC in the poll, 74% of parents said that they qualified, while 14% reported they did not qualify and 12% did not know. Notably, low-income parents were more likely than their middle- or high-income counterparts to not know if they qualified or report that they did not qualify, even though many of these parents would have been eligible. Additionally, unemployed and part-time-employed parents were significantly less likely to say they were eligible for the credit than were full-time employed parents, despite the removal of the credit’s phase-in with earnings for 2021.
Figure 5: Did you qualify for the Child Tax Credit in 2021?
Note: Numbers may not add to 100% due to rounding.
Administrative issues not only hindered access, but also prevented some claimants from receiving the credit in the format that best suited their family’s financial needs. By default, the ARP’s expansion of the CTC provided half of the credit via monthly payments (with the other half at tax filing) but gave parents the option to receive the full credit when they file their 2021 tax return. A sizeable minority of survey respondents (18%) attempted to opt out of monthly payments. These parents, however, often found opting out challenging: Approximately half of parents (52%) who attempted to opt out of monthly payments said that it was very or somewhat difficult to do so. They often found the process too complicated and time consuming, compounded by identification-related barriers:
“I had a hard time finding the steps on how to opt out of the Child Tax Credit payments.”
“We ended up taking the payments because the opt out option was so complicated and time consuming that we couldn’t even complete it.”
“[I struggled to opt out] because I don’t have an identity card.”
“[There were] too many steps to take for ID.me [identity verification] and then having to have my spouse do it as well.”
While monthly payments can help families cover the costs of raising children throughout the year, BPC’s survey finds that many parents prefer a larger credit at tax time. For some low-income families, a lump-sum refundable credit provides a useful forced savings mechanism. Accordingly, administrative barriers to opting out of monthly payments make it more difficult for these families to effectively manage their financial needs.
3. As policymakers debate future changes to the CTC, they should also focus on efforts to expand public knowledge about the credit, more clearly convey current policy, and enact administrative reforms that make the program easier to navigate for all eligible families.
Our survey results demonstrate that the CTC can have a significant impact on families’ finances, but that administrative issues leave many parents behind. Policymakers should consider the following recommendations to maximize the support that American families receive from the program:
- Increase parents’ understanding of the CTC by improving communication. Although parents have a general level of familiarity with the CTC, disparities in claiming rates suggest that parents would benefit from greater information about how to navigate the claiming process. The federal government, state and local governments, the private sector, and nonprofit organizations could better coordinate to assist parents, particularly those who are low-income, in determining their eligibility for the CTC and understanding the steps they need to take to claim the credit.
- When rolling out future modifications to the CTC, more clearly convey policy changes. Survey responses indicated that many parents did not fully understand the updated version of the credit rolled out in 2021. Parents reported that the communication of the changes to the credit was often inadequate. Specifically, 31% of parents said that the removal of the $1,400 per-child refundability cap was not well communicated, and 28% felt similarly about the elimination of the earned income phase-in. These two modifications alone significantly increased eligibility for the full value of the credit for low-income families. Indeed, the Congressional Research Service estimated that the ARP expansion increased full eligibility among poor households from 52% to 96%, so it is particularly concerning that many parents found those reforms to be poorly conveyed.
- Make administrative processes easier to navigate. Difficulties navigating the opt-out process prevented some families from receiving the CTC in the format that best supported their financial needs. Additional research has highlighted that many parents found the IRS’s non-filer tool—through which parents who earned little enough that they normally were not required to file taxes could sign up for the CTC—difficult to navigate for a variety of reasons, including that the site was not mobile-friendly and was initially only available in English.
Parents deserve a baseline understanding of the CTC to navigate the claiming process, and policymakers should work to ensure that the credit in its current form and any subsequent changes are well communicated to all families. Further, if a future version of the CTC gives parents options for receiving the credit or requires action to sign up, the IRS should work to ensure that processes are easy to navigate so that parents have flexibility in how they can claim the credit.
Survey Methodology
Morning Consult surveyed 1,509 parents or guardians of children under the age of 18 (for simplicity, “parents”) between February 17 and February 22, 2022. Results for the full sample have a margin of error of +/- 3%.
Click here for the survey crosstabs.
1Survey respondents were screened on whether or not they were a parent or guardian of any children under the age of 18. Throughout the analysis and blog, this audience is referred to as “parents.”
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