All children deserve to grow up with the resources needed to be healthy and thrive. Yet millions of families across California struggle to afford food and other necessities because many jobs fail to pay enough to make ends meet, particularly in the face of persistently high inflation and rising housing costs.
Growing up in poverty can have dire consequences for children’s futures, but research shows that policymakers can mitigate or prevent this harm by giving families with low incomes more resources, like the Child Tax Credit. This is why federal policymakers must ensure that children who are currently excluded from the full federal Child Tax Credit because their families’ income is too low or because of their immigration status are provided this vital credit. With several provisions of the Child Tax Credit slated to expire at the end of 2025, Congress has an opportunity to improve the credit to promote a thriving childhood and a strong future for all children.
Policies Like the Child Tax Credit Can Improve Children’s Outcomes
Research shows that increasing financial resources for families with low incomes, including through refundable tax credits, has the potential to improve children’s health, educational attainment, and earnings prospects as adults.1A refundable income tax credit is a type of credit that benefits families and individuals with very low incomes. The credit provides the same value regardless of how much tax filers owe in personal income taxes. For example, a family who qualifies for a $500 refundable credit and owes $200 in taxes will get the full $500 credit, with $200 covering their taxes and $300 as a cash refund. If the family owes no tax, they will get the full $500 as a cash refund. Additional evidence from the recent one-year expansion of the federal Child Tax Credit shows the powerful immediate effects of targeting sizeable financial resources to families with low incomes. In 2021, for the first time in the Child Tax Credit’s history, nearly all families with low incomes became eligible for $3,600 per child ages 0 to 5 and $3,000 per child ages 6 to 17. This significantly boosted families’ incomes, bringing the national child poverty rate to an historic low and cutting California’s child poverty rate by more than 40%.
The expanded Child Tax Credit was also associated with substantial reductions in racial income inequities, particularly among families with very low incomes, and with declines in food insufficiency and food insecurity, suggesting that increasing access to the credit among families with low incomes would improve child and family well-being. Researchers believe these improvements could produce broader benefits to society, given the current high costs associated with childhood poverty.
How Does the federal child tax credit work?
The federal Child Tax Credit currently provides families with $2,000 per dependent child under age 17, but families with low incomes — who are most in need of additional income to meet basic needs — are excluded from the full credit.2Additionally, the $2,000-per-child Child Tax Credit begins to “phase out” (gradually decline) for single parents with incomes over $200,000 and married couples with incomes over $400,000. For example, a single parent with one child must have an income of about $25,000 or more to qualify for the full Child Tax Credit, while a single parent with two children must earn about $28,000 or more. Families with income below these thresholds qualify for less than the full credit, and those with the lowest incomes – $2,500 or less – are completely excluded from the Child Tax Credit.
In addition, certain children are excluded from the Child Tax Credit based on their immigration status.3Specifically, children who have Individual Taxpayer Identification Numbers (ITINs) have been excluded from the Child Tax Credit since 2018. ITINs are issued by the Internal Revenue Service (IRS) to individuals who do not have Social Security Numbers to use for tax filing purposes. Several changes to the Child Tax Credit that took effect in 2018 are scheduled to expire after 2025, providing Congress with the opportunity to end the exclusion of children from the credit based on their families’ low income or immigration status.4If the Child Tax Credit reverts to its pre-2018 form, the maximum credit will decline from $2,000 per child to $1,000 per child and children age 17 will no longer be eligible, among other changes. For more information, see Urban-Brookings Tax Policy Center, The Tax Policy Briefing Book: What Is the Child Tax Credit? (updated February 2025).
Millions of Children Across California Are Blocked from Accessing the Credit Because Their Families’ Incomes Are Too Low
Despite the significant reduction in poverty brought about by the expanded Child Tax Credit in 2021, federal policymakers failed to extend the expanded credit beyond one year. Consequently, about 2 million children under the age of 17 across California are excluded from receiving the full Child Tax Credit because their families’ incomes are too low.
Families that don’t earn enough to qualify for the full credit include parents working part-time in order to go to school to pursue their career goals. For example, a single mother working halftime as a childcare worker and going to school to get her teaching credential makes just $20,600 per year — well below what is needed to make ends meet and support her two children in California. Yet she would qualify for only two-thirds of the full tax credit based on her low income — just $2,715 instead of $4,000. The $1,285 she is denied could have helped her buy about two months of groceries. A single parent working part-time to support three children would qualify for an even smaller share of the full Child Tax Credit. For example, if they earned $24,260 in annual wages as a part-time nursing assistant, they would receive just over half of the full tax credit — $3,510 instead of $6,000.
Children Are Excluded from the Full Child Tax Credit in Every California Congressional District
Statewide roughly one-quarter of children under age 17 are excluded from the full Child Tax Credit. However, in 20 of the state’s 52 congressional districts even more than a quarter of children are left out. The two districts where the most children are excluded are CA-37 (Kamlager) and CA-22 (Valadao), where over 40% of children are left out of the full credit because their families earn too little.
The districts where most children are excluded from the full Child Tax Credit based on their low family income are located largely in southern California, mainly in the Los Angeles region, with a few in the Central Valley. However, as highlighted in the map, districts across California leave out children who stand to benefit the most from receiving the maximum payment.
Built-In Barriers: How the Child Tax Credit Disproportionately Excludes Children of Color
Of all the major racial and ethnic groups, Black, Latinx, and American Indian/Alaska Native children are disproportionately blocked from the full Child Tax Credit because their families earn too little, reflecting past and present discrimination as well as long-standing inequities in opportunity. Nearly 4 out of 10 Black children (38%) and roughly one-third of Latinx children and American Indian/Alaska Native children are excluded from the full Child Tax Credit due to their families’ low earnings, compared to around 13% to 15% of Asian, white, and multiracial and other children of color. This disproportionate exclusion of many children of color reinforces long-standing barriers that have continuously blocked families and children of color from escaping poverty and being able to afford basic necessities.
Many Children Are Denied the Child Tax Credit Based on Their Immigration Status
Hundreds of thousands of dependent children nationwide have been outright excluded from the Child Tax Credit since 2018 because of their immigration status even though their families pay taxes. Policies that discriminate against people based on immigration status are deeply harmful to families and communities. The vast majority of undocumented individuals live in mixed status families and many children who are excluded from the Child Tax Credit based on their status likely live in California given the large share of immigrants in the state. This exclusion has put families and children at greater risk of hunger, poverty, and other severe hardships. Federal Republican budget proposals under consideration include further restricting access to the Child Tax Credit by taking it away from US citizen children based on their parents’ immigration status.
All families that pay taxes should be eligible for tax benefits like the Child Tax Credit. Undocumented residents nationwide paid $96.7 billion in taxes in 2022, including $19.5 billion in federal income taxes. These contributions help support public services even as undocumented residents are excluded from benefiting from many of those same services. In California, undocumented residents paid $8.5 billion in state and local taxes in 2022.
Ending Exclusions Would Promote a Strong Future for All Children
With provisions of the Child Tax Credit slated to expire soon, Congress has an opportunity this year to strengthen the credit by ending the exclusion of children based on their families’ low income or immigration status. Making the credit more inclusive would lift additional families out of poverty, reduce racial and ethnic inequities, and promote a strong future for all children — both in California and the nation.
