The Impacts of the 2021 Expanded Child Tax Credit on Family Employment, Nutrition, And Financial Well-Being

The 2021 temporary expansion of the child tax credit (CTC) was unprecedented in its reach, lifting 3.7 million children out of poverty as of December 2021. It provided families with up to $3,600 for every child in the household under the age of six, and up to $3,000 for every child between the ages of 6 and 17. Half the credit was issued monthly between July and December, 2021. Almost all middle- and low-income families with children were eligible for the CTC. Married parents making less than $150,000 and single parents making less than $112,500 per year were eligible to receive the full amount of the credit, which began to phase out slowly after these income cut-offs. The purpose of this study is to understand the impact of the expanded CTC on families and to inform current proposals to make the credit permanent.

To better understand how families responded to the CTC, we utilized the NORC/Amerispeak probability-based online panel to survey a nationally-representative group of 1,782 American parents eligible for the credit and a comparison group of 2,015 ineligible households. Wave 1 of the survey was administered between July 8 and July 13, 2021—immediately before the first CTC payments were delivered. Wave 2 was administered between December 27 and January 14, 2022—soon after the final payments were deposited on December 15, 2021. In this report, we compare the employment, well-being, and financial security outcomes of families before and after receiving six months of CTC payments. Overall, we find that families used the CTC to cover routine expenses without reducing their employment. Eligible families experienced improved nutrition, decreased reliance on credit cards and other high-risk financial services, and also made long term educational investments for both parents and children. We find that these changes were especially promising for Black, Hispanic, and other minority families, along with low- and moderate-income families, suggesting that the expanded CTC may be an important tool for addressing both racial financial inequality and a widening income gap in the United States.

This report was originally posted by the Brookings Institution on April 13, 2022.