Taxes and the Poor: Can poor families benefit from the child tax credit?

Taxpayers may claim a child tax credit (CTC) of up to $1,000 per qualifying child under age 17. The CTC is partially refundable, technically as an "additional child tax credit" (ACTC): in 2008 the credit can exceed tax liability by up to 15 percent of earnings above $12,050. Thus, for example, a family with two or more qualifying children and earnings of $22,050 may claim a refund of up to $1,500 over and above any tax liability. However, low-income families that earn $12,050 or less receive no CTC or ACTC.

• In 2005 more than one-quarter of all qualifying children were in families that could not receive the full CTC because they earned too little. Nearly half of those children were in families that received no credit at all
• The families of nearly half of all black children and 46 percent of Hispanic children received less than the full CTC in 2005 because they earned too little.
• The earnings threshold for receiving the ACTC is indexed for inflation, so that it increases each year as prices rise. As a result, poor families whose earnings fail to keep pace with inflation may receive less and less ACTC over time.
• Unless Congress extends it, the ACTC will sunset after 2010 along with the rest of the Bush tax cuts.