New Data Reveals That Most Child Tax Credit Recipients Spent Their Money and Didn't Save It
- The boosted Child Tax Credit has been off the table since the start of 2022.
- In the absence of those monthly payments, many families may now be struggling to cover basic expenses.
It's easy to see why so many families are hurting in the absence of monthly Child Tax Credit payments.
The Child Tax Credit got a major boost for 2021 -- one that helped many families shore up their finances and make ends meet at a time when the pandemic was still wreaking havoc on a lot of people. Last year, the maximum value of the credit rose from $2,000 to $3,600 for children under age 6, and $3,000 for children ages 6 to 17. The credit also became fully refundable so if a given recipient had no tax liability, they could still receive its maximum value.
Just as importantly, half of the 2021 Child Tax Credit was paid to families in the form of monthly installments. The first of those payments hit recipients' bank accounts in July, and the payments continued through December.
President Biden's initial goal was to keep the enhanced Child Tax Credit in place in 2022, monthly payments and all. But the spending bill that allowed for that option stalled out in the Senate earlier this year. And now, it's looking like parents won't be in line for that windfall in 2022. But new data reveals just how problematic the absence of that boosted credit is.
Those monthly payments were a lifeline
It's estimated that 60% of households with children received Child Tax Credit payments from July 2021 through early 2022, according to a report by the Annie E. Casey Foundation. Meanwhile, the most commonly reported uses of those monthly payments were for basic needs.
A good 65% of Child Tax Credit payment recipients used that money to buy food, while 40% used those payments to cover the cost of utilities. And 39% of recipients used the money for rent or mortgage payments.
All told, during the aforementioned time frame, 40% of Child Tax Credit recipients spent their monthly installment payments, while 23% managed to add that money to their savings. This highlights the importance of finding a way to bring those monthly payments back into the fold -- especially at a time when living costs are soaring due to inflation.
As it is, a lot of families have yet to recover from the financial impact of the pandemic. And those monthly Child Tax Credit payments no doubt helped households afford expenses they may have otherwise been forced to charge on a credit card and pay off over time. The fact that those payments have been missing since early 2022 is causing many households a lot of heartache.
It's also worth noting that much of the progress made by the boosted Child Tax Credit in 2021 has already been reversed in the absence of those monthly payments. In early 2022, millions of children plunged back into poverty after the enhanced credit lifted them out last year. That's something experts warned would happen, but to see it come to light is disheartening.
All told, there's no shortage of data pointing to how important the boosted Child Tax Credit is right now. But whether lawmakers are able to act on it is a different matter.
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