Tax credit could lift Hawaii families out of poverty

The great majority of Hawaii families with children under age 18 should receive monthly payments of up to $300 for each child starting this week as part of a pandemic stimulus package that is expected to provide help to struggling families and potentially propel thousands of children out of poverty.

But local advocacy groups warn that some of the poorest families could lose out if they aren’t provided with assistance in signing up for the expanded child tax credit, which was signed into law by President Joe Biden as part of the American Rescue Plan.

“These are the families that definitely need this kind of help the most, but without good community outreach a lot of them are going to miss out,” said Nicole Woo, director of research and economic policy for the Hawaii Children’s Action Network.

The monthly payments, which will go through the end of the year, could lift 43,000 children in Hawaii above or closer to the poverty line, according to a state analysis by the Center of Budget and Policy Priorities. Overall, 278,000, or 92% of the state’s children, are expected to benefit from the child credit.

The enhanced credit gives nearly all families $3,000 to $3,600 per child this year. A couple earning up to $150,000 will receive the full credit, as will single parents making up to $112,500. Half of the tax credit is being distributed in monthly payments of $250 for children ages 6 to 17 and $300 for children under 6. Those payments are slated to continue through December. The other half is credited when families file their taxes for 2021.

The federal government has had a child tax credit in place for about two dec­ades, which in recent years has provided a tax credit of $2,000 for every child under 17. That credit has been nonrefundable, however, and families with very low incomes often haven’t been able to benefit from it, said Woo. This year’s credit is refundable, which provides families with the benefit regardless of their tax liability status.

Those changes expand the benefit of the credit to lower-income families. Nationally, at least 27 million more children are expected to benefit from the expanded child tax credit, including 92,000 in Hawaii.

Supporters of this year’s child tax credit are hoping it will become a permanent part of the American safety net.

“With many of our safety net programs, it is based on poverty and it is really restrictive, and if you go up a dollar above the eligibility level, then you don’t get anything,” said Beth Giesting, director of the Hawai‘i Budget & Policy Center. “So it is really great for families to have the money to use how they need it most.”

The enhanced tax credit also does not count as income, so should not affect other safety net programs, such as Medicaid or the Supplemental Nutrition Assistance Program, known as SNAP, which provides food assistance.

Families who didn’t make enough to be required to file tax returns for 2019 or 2020 still qualify for the benefit and can sign up through a portal on the IRS website at bit.ly/3zhNAZB by providing basic information, including their name, current mailing address, email address, date of birth, bank account information if they have one, as well as Social Security numbers for themselves and their dependents.

Woo said it was important to conduct outreach with homeless shelters and social service providers to make sure that Hawaii’s most economically vulnerable are aware of the tax credits and how to sign up, if they haven’t been automatically entered.

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More information about the expanded child tax credit can be found on the following web pages:

>> Hawaii Children’s Action Network: hawaii-can.org/arpa

>> White House: childtax credit.gov