Tax credits focused on families living paycheck to paycheck have long been used as a tool to boost family incomes. Research has shown that boosting family incomes—through tools like income-targeted tax credits—expands opportunities for children and is associated with better school performance, better health outcomes, and higher earnings as adults. In 2021, the federal American Rescue Plan Act (ARPA) made powerful changes to the federal Child Tax Credit (CTC) that contributed to bringing child poverty down to record lows. However, these changes only lasted one year. Since Congress did not make this high-impact strategy permanent, hardship among children and families has risen drastically. An estimated 216,000 low-income Minnesotans under age 17 now do not qualify for the full value of the federal CTC because their family incomes are too low.
Many states are responding by adding state CTCs. In the 2023 tax bill, Minnesota policymakers included a powerful new CTC as a way to strengthen the economic stability of families across the state. The new CTC builds on the success of the federal CTC which focused on families with low income, children of color, and children living in rural areas. Beginning this year, Minnesotans may qualify for a CTC of up to $1,750 for each qualifying child in their family under the age of 18, reducing the amount of income taxes families pay. Another benefit of the CTC is that it’s refundable, possibly resulting in tax refunds for some CTC-qualifying families.
According to a February update from the office of Governor Tim Walz, Minnesota families have claimed $231 million through the new Child Tax Credit, benefitting 183,000 children. Families have qualified for an average credit of $1,322. Walz stated, "Our Child Tax Credit is helping families and children right now, while also making an investment that will pay off for generations."
Nearly 300,000 households, including 513,000 children, are estimated to qualify for the credit. The Minnesota CTC is estimated to cut child poverty by up to one third. Are you a Minnesota with children under age 18? Find out if you are eligible for the new CTC in a few clicks at Bridge to Benefits from Children’s Defense Fund Minnesota.
Need help preparing and filing your tax return? You may also be eligible for free tax filing assistance through Community Action Partnership of Hennepin County’s (CAP-HC’s) Volunteer Income Tax Assistance (VITA) Program. To learn more about eligibility, visit our Tax Filing Assistance page.
Sources: Center on Budget and Policy Priorities, including Policy Basics: The Child Tax Credit, December 2022; Institute on Taxation and Economic Policy, States are Boosting Economic Security with Child Tax Credits; Children’s Defense Fund – Minnesota Bridge to Benefits screening tool
