The American Rescue Program Act of March 2021 expanded the child tax credit for the 2021 tax year, resulting in more families receiving an increased monthly payment for each child based on family income and children’s age, ranging from $250 to It ranges from $300.
Families can use their payments for multiple purposes—for example, paying for food, debt, housing, and even depositing money in a savings account. Therefore, it is particularly interesting to learn that many parents or caregivers choose to invest in their children’s education. As the school year approaches, the Center for Budget and Policy Priorities analyzed data collected by the Census Bureau in July, August, and September 2021 and found that 40% of low-income households (defined as annual income less than $35,000) use payments Education expenses cover books and supplies, tuition, after-school planning and school transportation.
Other census data show that some of these expenses may be used for the adult’s own education, because in low-income families with children, about 5% of adults attend school.
The data was collected using the Census Bureau’s Family Pulse Survey during the five weeks from July 21 to September 27, and was sent to more than 1 million adults every two weeks. It provides near real-time data on how the pandemic affects the lives of Americans.
How does credit work?
A single person living in the United States with an income of less than 75,000 US dollars or a tax return of less than 150,000 US dollars with a spouse will receive 300 US dollars per month for each child under 6 years old, and 250 US dollars per month for each child 6 years or older. Children under 6 years old total US$3,600 per year, and each child 6 years and older is US$3,000 per year.
Individuals earning more than US$75,000 alone, or those who file tax returns of more than US$150,000 with their spouse, receive less income.
The child must be 17 years old or younger before December 31, 2021, apply for personal taxation as a dependent, live with the applicant for at least half of 2021, and have a social security number.
The monthly payment is sent between July 2021 and December 2021, and the balance is received when the 2021 tax is filed.
Parents can use the money in any way that meets their needs.
According to the US Internal Revenue Service, approximately 35 million eligible families are receiving advance payments.
Adults of all income levels who reported that they received child tax credit payments were asked how they spend their money, allowing multiple choices from rent to groceries. Most interviewees stated that their money was spent on more than one thing.
There are several options for school-related expenses, including books and supplies, tuition, tutoring services, after-school programs (except tutoring and childcare), and transportation to and from school.
According to data from the Census Bureau, out of the 10 families that received payment in the first three months (July to September), 3 reported using it for tuition, and a quarter of families with young children used it for tuition. Used for childcare expenses.
Approximately one in ten households reported using child tax credits to help pay for childcare expenses.
The consumption pattern varies with the age of the child.
The Census Bureau stated: “Compared with families with only children under 5, families with at least one school-age child are more likely to use CTC to pay for school fees.” “But families with only young children are more likely to spend money on Childcare-one-fifth in late July, and one-fourth from early August to late September.”
The Census Bureau stated that the increase “may be related to the beginning of the school year and the work of parents.”
There was no difference in the proportion of households that used tax credits for school expenses at the end of August and early September. By the end of September, compared with the beginning of this month, adults in households receiving child tax credits are unlikely to spend part of it on school-related expenses.
According to the Census, non-Hispanic black and Hispanic families reported that the percentage of using child tax credits to pay for school expenses was “much higher than that of non-Hispanic white families.” “By the end of September, it is estimated that four out of ten black families (42%) and three out of ten Hispanic families (31%) use CTC to pay for tuition, compared with approximately one-quarter of non-Hispanic whites Family (26%).”
According to the analysis of the Center for Budget and Policy Priorities, it is found that some unimportant parts of CTC payments are used to pay for education expenses. This is consistent with the evidence in Canada. In Canada, parents—especially low-income earners—use child allowances for necessities and Education expenses.
Finally, a warning. These data are indicative, not deterministic. They rely on about 6% of people surveyed by the government to choose to tell the government how they spend their money. Data collection was conducted at the beginning of the school year, and the survey asked a limited number of spending options. This is the early stage of the household spending process, and it will last at least one tax year—according to the current Congressional negotiations on President Biden’s spending proposal, it may take longer. We should not rush to draw any final conclusions on the long-term pattern of parental spending on federal cash assistance.
However, even with all these important warnings, what the data suggests may have important implications for education. A clear proposal to use an additional $60 billion in annual federal expenditures for families with annual incomes of up to $150,000 for K-12 tuition, tutoring, and after-school programs may be strongly resisted by both parties. reason. However, if the census data and the analysis of the budget and policy focus centers are credible, similar results can be obtained by expanding the child tax credit. News and education policymakers may not fully realize this. However, census data shows that parents will definitely figure out the money in their bank accounts.
Bruno V. Manno is a senior consultant for the K-12 project of the Walton Family Foundation.
additional Education next Coverage of child tax credits:
“How the turbocharged child tax credit makes schools electrify,” Frederick Hess, Fall 2021
“Should Congress make the expanded children’s tax credit permanent?” forum, Fall 2021