Child Tax Credit Payments Are Helping Families Cope With the Child Care Crisis
The IRS's expanded child tax credit program is giving families hundreds of extra dollars every month, and research shows that the payments are pulling some households out of poverty, while enabling others to start businesses or simply pay for babysitters.
One thing we're learning is that very few child tax credit (CTC) recipients say they are quitting jobs or working less after they began getting payments. In a new study from researchers at the Urban Institute, Washington University and others, almost 94% of parents surveyed said they were working the same amount or more after receiving the monthly child tax credits, despite there being no work requirement.
Many parents who work must pay for child care, and the child tax credits are helping them cover the hefty expense. Child care costs are a massive burden in the U.S., having grown 2,000% over the past four decades. A Treasury Department study released last week showed that one-third of working mothers had to reduce their hours during the pandemic to address child care issues. Monthly CTC checks of up to $300 per child are now helping families to afford child care, which in turn gives parents the opportunity to keep working.
“The CTC has not only enabled me to stress less about finances, but it has allowed me the opportunity to gain a safe and reliable vehicle and provide better food options for my family,” Christina, a New Hampshire parent said in the study’s summary. “Most importantly, it has allowed me to hire a babysitter at what I believe should be the minimum wage at $15 per hour.”
With the extra time she has after hiring a babysitter, Christina said she is running for a seat on the Nashua Board of Education.
Christina’s not the only one using her payment to help take on new challenges. More than 20% of parents in the survey either already run a small business or say they plan to start one in the next year, making them more than twice as likely as the overall population to do so.
While the checks have helped pull many children out of poverty, Congress has only approved the payments for 2021. So the aid many families are relying on could be temporary. And an unidentified issue this month led some families who successfully got the payments in July and August not to receive the September checks.
Janet Dimech, a mother of two, is among those who said they didn’t get a payment this month. She told Detroit’s ABC affiliate she and her husband planned to use this month’s check to pay for child care, since they both have new jobs.
Child care costs and the worker crisis
Families with working parents spend thousands of dollars per year on child care. Full-time child care costs an average of over $16,000 per year, which is more than it costs to own a new car. "Currently, the average family with at least one child under age 5 would need to devote about 13 percent of family income to pay for child care, a number that is unaffordable for most families," the new Treasury Department study states.
At the same time, companies are having trouble filling jobs in part because some parents are staying home to take care of their children. Child care, which offers low wages to most workers, is one of the industries that's in crisis. In a study released this summer, 80% of child care centers said they were experiencing staffing shortages.
For now, the enhanced child tax credits supply parents with up to $300 per month for each child under age 6 and $250 for children ages 6 to 18, with payments decreasing for single filers who make over $75,000 or those married filing jointly that have an income of more than $150,000. Rep. Richard Neal (D-MA), chair of the House Ways and Means Committee, has proposed to extend the benefits through 2025.
More from Money:
Millennials Aren't Having Kids Because It's Too Expensive
When Is the Next Child Tax Credit Payment? Here's the Schedule for the Rest of 2021
Child Tax Credit Payments Have Failed to Reach Many Vulnerable Families. Can Local Campaigns and PTA Moms Fix That?