TAX CREDITS:
WHAT FAMILIES
NEED TO KNOW
Jul i e Vo g t man ,
Se n i o r Co un s el
Amy M a t s ui,
Se n i o r Co un s el
Sus a n n a
B i rds on g, Fe l low
THE ECONOMY IN 2013
 Modest improvements
in employment
 Average unemployment
rate = 7.4% (8.1% in
2012)
 Some reductions in
poverty
 National poverty rate =
14.5% (15.0% in 2012)
 Child poverty rate =
19.9% (21.8% in 2012)
 Both unemployment
and poverty still very
high
Source: NWLC, Insecure & Unequal (Sept. 2014)
POVERT Y REMAINS HIGH AMONG
FAMILIES WITH CHILDREN
 One in five children (14.7 million) lived in poverty in 2013.
 Six in ten poor children lived in families headed by women.
60%
POVERTY RATES FOR SINGLE MOTHER FAMILIES WITH
CHILDREN, 2013
52.8%
46.3%
46.5%
44.1%
40%
31.6%
24.0%
20%
Married Couples
with Children
(7.6%)
0%
White, nonHispanic
Black
Source: Census Bureau, Current Population Survey
Source: NWLC, Insecure & Unequal (Sept. 2014)
Hispanic
Asian
Native American Foreign Born
INCOMES HAVE DECLINED
FOR MANY FAMILIES
 Earnings stagnated for many even before the recession
began.
 Median earnings for female workers overall were $27,736 in
2013, statistically unchanged since 2000 ($27,415).
 Median earnings for male workers overall declined to $39,903
in 2013 from $41,868 in 2000.
 Household incomes have declined —and low-income
families have been hit the hardest.
 Between 2000 and 2013, average household incomes in the
bottom 20 percent of the income distribution dropped by 15.2
percent, from $13,739 to $11,651.
Source: NWLC, Insecure & Unequal (Sept. 2014)
LOW-WAGE JOBS CAN
KEEP FAMILIES IN POVERT Y
 In 2013, nearly 70 percent of poor children lived in a
family where someone worked.
 Job growth during the recovery has been concentrated
disproportionately in low -wage industries.
 Low-wage jobs often have unstable work schedules &
involuntary part-time hours.
 23 percent of part-time workers worked part time involuntarily in
2013.
 The number and percentage of people who worked part-time or
part of the year—and lived in poverty—in 2013 were at the
highest level since at least 1987.
S o u r c e s : N W L C , C o l l a t e r a l D a m a g e : S c h e d u l i n g C h a l l e n g e s f o r Wo r k e r s i n L o w - Wa g e J o b s a n d T h e i r
C o n s e q u e n c e s ( A p r. 2 0 1 4 ) ; N E L P, T h e L o w - Wa g e R e c o v e r y ( A p r. 2 0 1 4 ) ; C B P P, P o v e r t y F e l l a n d
Health Coverage Improved in 2013, but Economic Recover y Is Slow to Reach Many (Sept. 2014)
LOW-WAGE JOBS CAN
KEEP FAMILIES IN POVERT Y
 Women are especially
likely to hold jobs that
pay low wages.
 Women are two-thirds of
workers in jobs that
typically pay $10.10 per
hour or less.
 One-third of women in the
low-wage workforce are
mothers—and 40 percent of
these mothers have family
incomes below $25,000.
 Nearly 522,000 single
mothers (12.0 percent) who
worked full time, year round
lived in poverty in 2013.
Source: NWLC, Underpaid & Overloaded: Women in Low-Wage Jobs (July 2014)
TAX CREDITS MAKE A DIFFERENCE!
 In 2013, the Earned Income Tax Credit (EITC) lifted
the incomes of 5.3 million people above the poverty
line.
 Nearly 1.5 million women
 More than 2.7 million children
Source: U.S. Census Bureau
TAX CREDITS FOR FAMILIES CAN HAVE
LONG-TERM BENEFITS FOR CHILDREN
Research links EITC to positive outcomes related to:
 Maternal & infant health
 Mothers with biggest EITC increases saw greatest improvements in
timely prenatal care, mental health, low birth weight & premature birth
 School achievement
 Multiple studies show higher test scores for students whose families
receive larger EITCs, as well as higher high school graduation/GED
completion rates
 College attendance rates also improved; EITC makes college more
affordable for families in addition to benefits in earlier school years
Source: Chuck Marr, Chye-Ching Huang & Arloc Sherman, CBPP, Earned Income Tax Credit Promotes Work, Encourages Children’s
Success at School, Research Finds (Apr. 2014)
TAX CREDITS FOR FAMILIES CAN HAVE
LONG-TERM BENEFITS FOR CHILDREN
Source: Chuck Marr, Chye-Ching Huang & Arloc Sherman, CBPP, Earned Income Tax Credit Promotes Work, Encourages Children’s
Success at School, Research Finds (Apr. 2014)
FEDERAL AND STATE
TAX CREDITS ARE AN
IMPORTANT RESOURCE
TO HELP FAMILIES MAKE
ENDS MEET
Earned Income
Ta x C r e d i t
C h i l d Ta x C r e d i t
C h i l d C a r e Ta x
Credit
P r e m i u m Ta x
Credit
IF ELIGIBLE FAMILIES CLAIM TAX
CREDITS, THEY COULD RECEIVE:
 Up to $6,143 from the federal Earned Income Tax Credit
(EITC).
 Up to $1 ,000 per child from the federal Child Tax Credit.
 Up to $2,100 from the federal Child and Dependent Care Tax
Credit.
 A Premium Tax Credit to help you purchase health insurance
through the Health Insurance Marketplace.
AND MANY STATES OFFER SIMILAR TAX
BENEFITS TO FAMILIES
In 2014:
24 states offer EITCs;
26 states offer child care credits; and
3 states offer child tax credits.
HOW MUCH CAN TAX CREDITS BE
WORTH? A LOT!
 In 2014, eligible families with three children in paid
child care in New York state could receive:
 Up to $6,143 in federal EITC benefits and up to
$1,843 in state EITC benefits.
 Up to $1,000 per child in federal Child Tax Credit
benefits and up to $330 per child in state child tax
credit benefits.
 Up to $2,100 in federal Child and Dependent Care
Tax credit benefits and up to $2,310 in state CADC
benefits.
HOW TAX CREDITS WORK
Tax credits can lower a family’s tax bill—and
possibly provide a cash refund.
If the tax credit is nonrefundable, it will lower
a family’s tax bill—at most, down to zero.
If the tax credit is refundable, it can erase a
family’s tax bill—and possibly provide them
with a refund.
TAX REFUNDS CAN HELP FAMILIES SAVE
FOR A RAINY DAY.
Families can use their refunds to create an
emergency fund or build up savings.
If families use direct deposit, they can split
their refunds—for example, put a little money
into a savings account and the rest into a
checking account.
Many EITC Coalitions can help families save
and build assets.
SO, WHICH ARE THE REFUNDABLE
CREDITS?
The federal Earned Income Tax Credit;
The federal Child Tax Credit;
12 state child care credits and 21 state EITCs.
Sadly, the federal Child and Dependent Care
Tax Credit is NOT refundable.
EARNED INCOME TAX CREDIT
The federal Earned Income Tax Credit is a
wage supplement for low - and moderateincome families.
In general, the value of the credit is based
upon a family’s income and number of
children. But there is also a smaller credit
available to individuals and couples without
children.
HOW MUCH IS THE EITC WORTH?
 Up to $6,143 for a family with three or more children
who earned less than $46,997 ($52,427 married filing
jointly) in 2014.
 Up to $5,460 for a family with two children who earned
less than $43,756 ($49,186 married filing jointly) in
2014.
 Up to $3,305 for a family with one child who earned less
than $38,511 ($43,941 married filing jointly) in 2014.
 Up to $496 for an individual without qualifying children
who earned less than $14,590 ($20,020 married filing
jointly) in 2014.
THE CHILD TAX CREDIT
A family can claim $1,000 per child, no
matter how many children they have.
Example: Mike and Carol Brady have 6
children. They can claim a $6,000 Child Tax
Credit.
THE CHILD TAX CREDIT—REFUND
 If a family does not owe enough taxes to use all
of its Child Tax Credit, it may be eligible for a
refund.
 The family will receive either
 15% of their income above $3,000 or
 the amount of the Child Tax Credit that exceeds their
tax liability, whichever is less.
Example: A parent earning $8,500 with no
income tax liability will receive a refund of $825
from the Child Tax Credit.
THE CHILD AND DEPENDENT CARE TAX
CREDIT
• The Child and Dependent Care Tax Credit can
help families meet their child and dependent
care expenses.
• Any kind of child care – a center, a family
day care home, a church, or a neighbor’s or
relative’s house – qualifies.
HOW MUCH IS THE CHILD AND
DEPENDENT CARE TAX CREDIT WORTH?
•
Families can claim up to $6,000 in child care expenses
for two or more children or dependents, or $3,000 for
one child or dependent.
•
Depending on their income, a family receives between
20 and 35% of qualifying child and dependent care
expenses.
•
So the credit is worth a maximum of $2,100 for two
children or dependents and $1,050 for one child or
dependent.
 Because this credit is nonrefundable, families can
only use it to reduce their tax liability – but this can
increase their other refunds.
ONE IMPORTANT THING TO REMEMBER
ABOUT THE CHILD AND DEPENDENT CARE
TAX CREDIT…
 The care must be employment-related – that is, the
adults in the family must use the child care so that
they can work or look for work.
THE CHEAT SHEET
The credit
To be eligible, a
family needs
Age of qualifying
children
EITC
Earned income not Under 19, or
more than
under 24 if a full$52,427 for a
time student
married couple
with 3 kids
$6,143
CTC
$3,000 in earned
income for refund
$1,000 per
child
CDCTC
Work-related child Under 13
care expenses
Under 17
Maximum
credit value
$2,100
WILL REFUNDS FROM THESE CREDITS
AFFECT A FAMILY’S ELIGIBILIT Y FOR
OTHER BENEFITS?
• Normally, no!
• The amount of a refund from the Child Tax Credit or
the Earned Income Tax Credit cannot be used to
determine eligibility for, or amount of, Medicaid,
Supplemental Security Income, Food Stamps, or low income housing.
• A Child Tax Credit refund cannot be used to
determine eligibility for, or amount of, TANF
benefits.
BUT…
 States can develop their own rules on whether an
Earned Income Tax Credit refund can be used to
determine eligibility for and amount of TANF
benefits.
THESE CREDITS ARE GREAT! HOW DO
FAMILIES GET THEM?
• To claim these three credits, a family with children
must file the IRS form 1040 or 1040A, but not the
1040 EZ.
• Families must also file a separate form for each
federal tax credit.
• Families can also amend tax returns from previous
years.
 States have different forms and procedures for
claiming state tax credits.
POLL QUESTION
PREMIUM TAX CREDIT HELPS FAMILIES
PAY FOR HEALTH INSURANCE
 The Affordable Care Act—the health care law
sometimes called Obamacare—is making health
coverage more affordable and easier to obtain for
millions of American women and their families.
 In the first year alone, 8 million people signed up for
health insurance through the Marketplace.
 85% of them received financial assistance to help
cover the monthly cost.
2015 ENROLLMENT
 The 2015 “open enrollment period” —when anyone
will be able to sign up for health insurance or to
change their current plan—runs from November 15,
2014-February 15, 2015.
 Outside of open enrollment, people may qualify for
special enrollment periods if they experience certain
life events such as marriage, the birth or adoption of
a child, or a job change.
 Questions about enrollment? Go to healthcare.gov or
call (800) 318-2596.
PREMIUM TAX CREDIT: FINANCIAL
ASSISTANCE TO HELP PEOPLE BUY
HEALTH INSURANCE
• Available as soon as individuals and families sign up for
health insurance.
• Amount is based on household income and family size .
• Paid directly to health insurance company each month .
• When families file their tax return, their final Premium
Tax Credit will be calculated.
• Families should report any changes in income or family
size to the Health Insurance Marketplace throughout the
year, because that may affect their Premium Tax Credit.
PREMIUM TAX CREDIT: HOW DO PEOPLE
QUALIFY AND HOW MUCH ASSISTANCE
DO THEY RECEIVE?
• People with household incomes between 100 -400%
of the federal poverty line are eligible (between
$23,850 and $95,400 for a family of four).
• Designed so that individuals and families spend no
more than a certain percentage of their income on
health insurance, using a sliding scale .
• The Premium Tax Credit covers the difference
between the actual cost of the health insurance plan
and the family’s contribution.
EXAMPLE: THE SMITH FAMILY
 John, Maria, and their seven year old twins have a household
income of $47,700 (200% FPL) and want to purchase the
silver benchmark health insurance plan.
 At this income level, the family will contribute no more than
6.3% of their annual income —or $3,005—toward their health
insurance premium.
 The total annual premium for the benchmark health insurance
plan in their area is $9,000.
 Therefore their annual Premium Tax Credit is worth $5,995
($9,000-their contribution of $3,005), or $500 a month .
 Every month, their insurer will be paid the $500 Premium Tax
Credit directly, and John and Maria will be responsible for
paying the insurer the remaining $250 a month.
PREMIUM TAX CREDIT: TAX YEAR 2014
 If you received a Premium Tax Credit in 2014, you will
report that on the tax return that you file in 2015.
 The Health Insurance Marketplace will give information
regarding your Premium Tax Credit to the IRS.
 Then the projected 2014 income (what you thought you
would make) and household size that you provided when
you signed up for health insurance will be reconciled with
your actual 2014 income (what you actually made) and
household size.
 Remember to update the Marketplace with any changes
in income or household size that occur throughout the
year—don’t wait until tax time!
PREMIUM TAX CREDIT:
IMPORTANT REMINDERS
• Sign up for health insurance!
 Encourage people who don’t have health insurance to sign up
at www.healthcare.gov or (800) 318-2596 between
November 15, 2014 and February 15, 2015.
• Financial assistance is available!
 Let families know that the Premium Tax Credit can help
them afford their monthly health insurance premium!
• Keep information up to date.
 Families should report any change in income or family size to
the Marketplace throughout the year to avoid receiving too
much or too little financial assistance.
• If families used a Premium Tax Credit to help pay for health
insurance in 2014, they need to file a 2014 tax return .
NOW THAT YOU KNOW
ABOUT TAX
CREDITS…YOU CAN
HELP SPREAD THE
WORD TO FAMILIES!
All it takes
is 5 easy
steps!
5 EASY STEPS TO HELP FAMILIES CLAIM
TAX CREDITS*
• Get the facts about tax credits.
• Visit NWLC’s website (www.nwlc.org/loweryourtaxes) and
download our state specific fliers on tax credits (in English,
Spanish, and some additional languages).
• Get the facts about free tax preparation assistance.
• Call the IRS’ free hotline at 1-800-906-9887 to locate a VITA
site near you. You can also visit
http://irs.treasury.gov/freetaxprep/
 * Visit www.nwlc.org/lower your taxes and download NWLC’s
Tax Credit Outreach Campaign Toolkit for more details and
sample materials.
5 EASY STEPS, CON’T.
• Spread the word to families with children.
•
Distribute fliers, write a newsletter article, use your website
and social media, give information over the phone, and work
through the media. Templates are available on our website!
• Partner up to expand your reach.
•
Work with EITC coalitions (call (202) 408-1080), other
organizations in your community, local businesses and state
agencies, to get the word out to families with children .
• Collect success stories.
•
Keep track of families who tell you that they claimed and
benefited from tax credits. Their stories can show people and
policymakers the difference tax credits can make in people’s
lives! Share your stories with us at
http://www.nwlc.org/action/share-your-story-tax-creditsoutreach.
 Become an NWLC Community Par tner. Sign up to become a
community par tner at http://action.nwlc.org/communitypar tner.
NWLC offers technical assistance and tailored materials to our
community par tners.
TO LEARN MORE…
• On the needs of low -income families, visit
www.nwlc.org/our-issues/poverty-incomesupport
• On tax credits and tax credits outreach, visit
www.nwlc.org/loweryourtaxes.
To get involved in the debate over continuing
these tax credits, visit www.NWLC.org to sign
up for alerts.
TO LEARN MORE…
 On November 6 at 2:00 EST, we’ll offer
another free webinar focused on tax credits
outreach.
 Stay tuned for registration information!