Depending on your dependents
Analysts predict new child tax credit could halve child poverty, help families in need
Shatina McNair wanted to pay off her car last year.
But then the pandemic hit, and the 40-year-old single mother of three girls saw her income slashed significantly month after month. She’s used to making between $25,000 to $35,000 annually as a server at the Applebee’s Grill + Bar in Auburn Hills — But in 2020, she brought home less than $19,000.
The $1.9 trillion American Rescue Plan signed into law this month was designed to help people like McNair.
It includes a substantial change to the Child Tax Credit, among other provisions, that could see child poverty cut in half nationwide according to an analysis by the Center on Poverty and Social Policy at Columbia University. The Center on Budget and Policy Priorities is more optimistic, estimating 90% of children could be lifted out of poverty.
Most significantly, it raises the ceiling of the tax credit from $2,000 per child to $3,000 per child, or $3,600 for children under six. The age limit for who can be claimed for the credit was also raised from 16 to 17. As a short term assistance measure, half of the credit will be distributed in advance as monthly payments to families from July to December.
McNair, who lives in Pontiac, will likely see about $6,000 from the credit. She has qualified in the past for the Child Tax Credit, but never for the full amount, she said. Under the former tax law, those who owed little or no income taxes could only qualify for up to $1,400 per child, according to the Brookings Institution.
Some 48 million households are expected to claim the Child Tax Credit for 2020, according to the Joint Committee on Taxation of Congress.
“How much this money will help us depends on what happens with the coronavirus,” McNair said. “If the restaurants shut down again, it will be just enough to keep us afloat. But if business continues to increase, this will help me pay off some debt, buy some things for my daughter for college.”
McNair has worked at Applebee’s for 10 years now raising her daughters. They’re an energetic group, all of them taking
part in competitive cheerleading from a young age. When dining shut down, her dream of paying off the 2015 Mazda she uses to drive her daughters to school and cheerleading practice was put on hold. McNair transitioned to running carry-out for the restaurant while helping her three girls, Madison, 18, Lauren, 16, and Alana, 10, figure out how to keep up with virtual school.
In October, all but her youngest daughter caught the virus, forcing the family into more than a monthlong on and off quarantine. Through unemployment assistance she was able to keep her family’s life as normal as one could, she said, amid the constant barrage of life and financial adjustments.
“Unemployment did help a lot, but I’ve had a job since I was 16, so it was a new experience because I’ve never needed unemployment,” McNair said. “Honestly, anything helps, and I am so appreciative of what they are going to be giving to families, because it’s more than what we had before. But, I still saw a significant drop in income last year.”
Susan Benson, director of specialized student services at Oakland Schools, also says she feels grateful for the new tax law. For 22 years, she’s worked with thousands of homeless and impoverished students across Oakland County.
Like McNair, she emphasizes her appreciation for the financial help, but also knows it won’t go nearly far enough in the end to keep families from crossing and living at the poverty line.
“This won’t change the availability of affordable housing, or provide daycare, or transportation for the families who are homeless or frequently without shelter. We’re thrilled people will get a hand up, but we know there’s also bigger tasks to tackle,” Benson said.
There is some extra money for families in the new plan for day care. The Child and Dependent Care Tax Credit, for child or senior care expenses, was raised from $3,000 to $8,000 for those with one child. For those with two or more children, it was elevated from $6,000 to $16,000.
“Everything, everything helps, our families really need it,” Benson said. “But it’s imperative that we have education out there that families have to file taxes in order to get this money. There’s a big shift now where a lot of people are just making enough to get by and maybe they haven’t had a need to file taxes to take advantage of these credits. It’s going to be a major undertaking to get people aware of this.”
Benson and her team work to identify and assist kids in the local school districts through the McKinney-Vento Act, a federal program to support educating students in fluctuating shelter situations. About $800,000 under the American Rescue Plan will go towards support identification, enrollment, school participation and wraparound services for children and youth experiencing homelessness according to Jennifer Erb-Downward, a senior research associate at the University of Michigan’s Poverty Solutions center.
“This is critical now because during the pandemic the identification of homeless students has decreased. When children who are homeless are not identified they do not receive the support they need to attend and succeed in school,” Erb-Downward said. “This funding provides a real opportunity not only to identify children who are homeless and support them in school but to connect families with resources that could fundamentally end their homelessness. This is a transformational opportunity.”
For families like McNair’s, the American Rescue Plan is an unexpected and welcome help. Just how far the dollars will stretch, for programs and individuals, depends heavily on how the virus and vaccination efforts play out.
Through the tumultuous last year, McNair decided to return to school. She’s looking forward now to starting a nursing program at Oakland University in the spring semester. Her oldest daughter will also be applying to colleges to study medicine. The extra $6,000 is helping to somewhat put her mind at ease as she and her daughters prepare for their next chapter in life.
“I’m just grateful for the opportunity to go back to school and try to pick this up,” she said. “Nothing is impossible, the word itself is ‘I’m possible.’”