TAX CREDITS: WHAT FAMILIES NEED TO KNOW

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1 TAX CREDITS: WHAT FAMILIES NEED TO KNOW Presenters: Christina Postolowski, Young Invincibles Amy Matsui, National Women s Law Center Amelia Bell, National Women s Law Center

2 ECONOMIC CHALLENGES FACING MILLENNIAL FAMILIES

3 WHO IS YOUNG INVINCIBLES?

4 MILLENNIAL GENERATION! Ages 18-34! Most diverse! Most educated! Parents! 20.5 million parents, nearly 30% of the Millennial population! 83% of new moms are Millennials! Hardest hit by the Great Recession! 4.3 Millennial parents - or 1 in 5 - live below the poverty line

5 MILLENNIAL POVERTY RATES

6 PERFECT STORM OF ECONOMIC CHALLENGES! Most impoverished parents in a quarter century! 1 st generation in modern history to have " poverty rates and # incomes than 2 preceding generations! Causes! Wage stagnation and wage decline! Rising college costs and student debt! High unemployment and underemployment! Growing cost of child care

7 COSTS OF RAISING A CHILD

8 WHAT IT MEANS FOR MILLENNIAL PARENTS! Forgoing education! Forgoing career advancement! Living with reduced financial resources! Making sacrifices in quality of life to make ends meet

9 FEDERAL AND STATE TAX CREDITS ARE AN IMPORTANT RESOURCE TO HELP FAMILIES MAKE ENDS MEET Earned Income Tax Credit Child Tax Credit Child Care Tax Credit Premium Tax Credit

10 IF ELIGIBLE FAMILIES CLAIM TAX CREDITS, THEY COULD RECEIVE:! Up to $6,242 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.

11 AND MANY STATES OFFER SIMILAR TAX BENEFITS TO FAMILIES! In 2015:! 26 states offer EITCs;! 26 states offer child care credits; and! 3 states offer child tax credits.

12 HOW MUCH CAN TAX CREDITS BE WORTH? A LOT!! For tax year 2015, eligible families with three children in paid child care in New York state could receive:! Up to $6,242 in federal EITC benefits and up to $1,873 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.

13 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.

14 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.

15 SO, WHICH ARE THE REFUNDABLE CREDITS?! The federal Earned Income Tax Credit;! The federal Child Tax Credit;! 12 state child care credits and 23 state EITCs.! Sadly, the federal Child and Dependent Care Tax Credit is NOT refundable.

16 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.

17 HOW MUCH IS THE EITC WORTH?! Up to $6,242 for a family with three or more children who earned less than $47,747 ($53,267 married filing jointly) in 2015.! Up to $5,548 for a family with two children who earned less than $44,454 ($49,974 married filing jointly) in 2015.! Up to $3,359 for a family with one child who earned less than $39,131 ($44,651 married filing jointly) in 2015.! Up to $503 for an individual without qualifying children who earned less than $14,820 ($20,330 married filing jointly) in 2015.

18 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.

19 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.

20 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.

21 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.

22 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.

23 THE CHEAT SHEET The credit To be eligible, a family needs Age of qualifying children Maximum credit value EITC Earned income not more than $53,267 for a married couple with 3 kids Under 19, or under 24 if a fulltime student $6,242 CTC $3,000 in earned income for refund Under 17 $1,000 per child CDCTC Work-related child care expenses Under 13 $2,100

24 WILL REFUNDS FROM THESE CREDITS AFFECT A FAMILY S ELIGIBILITY 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 lowincome housing. A Child Tax Credit refund cannot be used to determine eligibility for, or amount of, TANF benefits.

25 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.

26 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.

27 POLL QUESTION

28 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 2015, almost 12 million people signed up for a health plan through the Marketplaces.! 87% of them qualified for financial assistance to help cover the monthly cost.

29 2016 ENROLLMENT! The 2016 open enrollment period when can sign up for health insurance or change your plan runs from November 1, 2015-January 31, 2016.! 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)

30 ADVANCE 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, they will calculate their final Premium Tax Credit. 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.

31 ADVANCE PREMIUM TAX CREDIT: HOW DO PEOPLE QUALIFY AND HOW MUCH ASSISTANCE DO THEY RECEIVE? People with household incomes between % of the federal poverty line are eligible (between $24,250 and $97,000 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 Advance Premium Tax Credit covers the difference between the actual cost of the health insurance plan and the family s contribution.

32 EXAMPLE: THE SMITH FAMILY! John, Maria, and their seven year old twins have a household income of $48,500 (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 $3,055 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 $5,945 ($9,000-their contribution of $3,055), or $495 a month.! Every month, their insurer will be paid the $495 Premium Tax Credit directly, and John and Maria will be responsible for paying the insurer the remaining $255 a month.

33 PREMIUM TAX CREDIT: TAX YEAR 2015! If you received a Premium Tax Credit in 2015, you will report that on the tax return that you file in 2016.! The Health Insurance Marketplace will give information regarding your Premium Tax Credit to the IRS.! Then you will reconciled your projected 2015 income (what you thought you would make) and household size that you provided when you signed up for health insurance with your actual 2015 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!

34 PREMIUM TAX CREDIT: IMPORTANT REMINDERS Sign up for health insurance!! Encourage people who don t have health insurance to sign up at or (800) between November 1, 2015 and January 31, 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 2015, they need to file a 2015 tax return.

35 NOW THAT YOU KNOW ABOUT TAX CREDITS YOU CAN HELP SPREAD THE WORD TO FAMILIES! All it takes is 5 easy steps!

36 5 EASY STEPS TO HELP FAMILIES CLAIM TAX CREDITS* Get the facts about tax credits. Visit NWLC s website ( 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 to locate a VITA site near you. You can also visit * Visit and download NWLC s Tax Credit Outreach Campaign Toolkit for more details and sample materials.

37 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) ), 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 Become an NWLC Community Partner. Sign up to become a community partner at NWLC offers technical assistance and tailored materials to our community partners.

38 TO LEARN MORE! About ACA enrollment, visit:!

39 TO LEARN MORE! On tax credits and tax credits outreach, visit On December 10 at 2:00 EST, we ll offer another free webinar focused on tax credits outreach.! Stay tuned for registration information!