New Mexico’s child tax credit will decrease poverty
For the first time, New Mexico families will be able to claim a state child tax credit on their state income tax returns this year for each of their children, a simple act that for many will have a significant impact on their lives.
Credits like this are a proven tool to reduce child poverty. The expansion of the federal child tax credit in 2021 reduced childhood poverty by 46%, according to U.S. census data. Since the federal credit expansion expired, childhood poverty nationwide has doubled.
Investing in our children’s well-being today will help this generation of New Mexico children have more reliable transportation and shelter, arrive at school more prepared to learn, experience better physical and mental health outcomes, and simply feel safer.
The new state child tax credit is the latest in a succession of policies adopted by Gov. Michelle Lujan Grisham’s administration to improve the lives of our children from cradle to career. These initiatives include the creation of the Early Childhood Education and Care Department, one of the first Cabinet agencies dedicated to early care and education in the nation. The establishment of the Early Childhood Trust Fund ensures consistent funding for our youngest children over the coming decades.
Eligibility for New Mexico’s child care assistance program has been expanded, making child care free for a majority of New Mexico families. The administration has also achieved a historic expansion of pre-K that achieved universal access for 4-year-olds and
increased access for 3-year-olds. Together, these efforts reflect a comprehensive approach to supporting and nurturing New Mexico’s children at every stage of their development.
Our tax code also has become increasingly family friendly in the last five years. We’ve expanded and improved the Working Families Tax Credit — another proven anti-poverty tool — updated the Low-Income Comprehensive Tax Rebate and created a new dependent deduction to offset harm done to New Mexico families by 2017 federal tax changes.
Thanks to these and other changes, New Mexico now has one of the most progressive tax structures in the nation, according to the Institute on Taxation and Economic Policy. We now rank ninth, according to the institute’s most recent “Who Pays?” report, vaulting up 18 spots from its previous ranking.
The new child tax credit will return an estimated $180 million to 292,000 families statewide. The credit is worth as much as $600 per child for those with lower incomes, reducing in value as income levels rise. Because it is a refundable credit, families will always get the full benefit of the amount they qualify for.
Who qualifies? Basically, if you can claim a child as a dependent for federal tax purposes, you’ll be able to claim the state child tax credit for that child. This includes grandparents raising grandchildren and families who file their taxes using an ITIN.
State-level child tax credits are becoming increasingly common across the country, with 14 states now offering some version of the credit, and for good reason: It is good tax policy. Because the credit is refundable and especially valuable for lower and middle-income families, it is another step toward making our overall tax code more progressive, lessening the burden on those families. Most importantly, it will help reduce childhood poverty and improve economic stability for New Mexico families.