Investing in children from families with low incomes is a proven way to reduce child poverty, improve children’s health, and allow families to invest in their children’s futures. However, new Urban Institute analysis finds that the tax benefits for children included in the One Big Beautiful Bill Act (OBBBA) will primarily benefit middle- and high-income families.
Specifically, changes to the Child Tax Credit (CTC) that raise the maximum amount and limit eligibility for parents without social security numbers increase benefits for families with middle- and high- incomes by about $200 and decrease average benefits for families in the bottom 20 percent of income distribution by $100.
Additional changes to tax benefits for families in the OBBBA—child care tax benefits, the adoption tax credit, and the temporary pilot of “Trump Accounts”—will impact significantly fewer families and mostly benefit families with middle- and high-incomes.
While OBBBA will increase tax benefits for children in nominal terms, the analysis projects that spending on children through the tax code as a share of the economy is expected to decline over time.
Relatedly, Urban researchers have modeled five options to increase the CTC to better reach children whose parents earn too little to qualify under OBBBA’s provisions. Explore their analysis which offers policymakers ways to further expand the credit for working families.
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