House panel hears Minnesota's new child tax credit up and running

Got a kid? Have a credit.

As part of the 2023 tax law, Minnesota initiated a new child tax credit worth up to $1,750 for each child 17 years old and younger in households earning up to $96,250 a year. While the new credit has just become available, the House Taxes Committee heard some early returns Tuesday about how many filers are taking advantage of it.

It’s estimated that the child tax credit will cost the state about $400 million a year, but proponents claim it will significantly reduce child poverty, based upon results from a similar federal credit that lapsed in 2021.

“If done correctly, this could lower child poverty by 33%,” said Revenue Commissioner Paul Marquart. “In all the years I’ve been here, I’ve never seen any single program that we have passed into law out of this tax committee that I think could have such a transformational, generational impact on the state.

“We know that if we lower child poverty, we have better educational outcomes, a stronger workforce, better economies, better health outcomes, lower health care costs. It really makes a huge difference.”

The federal measure for child poverty is annual income of $30,000 or less for a family of four.

“We know that 10% of the families qualifying for the credit have never filed before,” Marquart said. “You need to file to get the credit. And so the outreach has been significant.

“It’s up to $178 million that’s gone out on the child tax credit so far. And about $43 million on the working family credit. That is 139,000 qualifying children, at this point. But we’re looking at reaching 300,000 families, so there’s a lot more work to be done.”

Unlike the child tax credit, the working family credit is also available to families with older children, including all 18-year-olds and 19- to 23-year-olds who are students or who are permanently and totally disabled.

Amy Fisher, a tax preparer for Prepare and Prosper, is encountering clients for whom the child tax credit is making a big difference.

She said the $1,750 credit “can pay for six weeks of school-age summer care, allowing parents more job possibilities. It will put wiggle room into so many families’ budgets and give them more choices.”

The credit begins to phase out at $29,500 of income, or $35,000 for married joint filers, finally phasing out altogether at $96,250 for a family with four young children. There is no limit on the number of children for whom credits can be claimed.

But it’s a fully refundable credit, meaning that you could receive a check from the state if other aids and credits reduce your tax burden to zero.