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Treasury OTA Examines Family-Focused Tax Provisions

MAY 1, 2019

Treasury OTA Examines Family-Focused Tax Provisions

DATED MAY 1, 2019
DOCUMENT ATTRIBUTES

Tax Support for Families under Current Law
2019 Law

The OTA Working Papers Series presents original research by the staff of the Office of Tax Analysis. These papers are intended to generate discussion and critical comment while informing and improving the quality of the analysis conducted by the Office. The papers are works in progress and subject to revision. Views and opinions expressed are those of the authors and do not necessarily represent official Treasury positions or policy. Comments are welcome, as are suggestions for improvements, and should be directed to the authors. OTA Working Papers may be quoted without additional permission.

May 2019

Deena Ackerman1 and Michael Cooper2

This paper discusses major tax provisions that support typical families under current law, the number of families that benefit from these provisions, and the degree to which they benefit from these provisions. The paper discusses recent changes to these provisions. The paper also presents stylized marginal tax rates, average tax rates, and the tax support for dependents under current law. For Tax Year 2019, an estimated 64.1 million families receive $215.9 billion in benefit, with an average benefit from the credits of $3,366.

Keywords: Families, Child Tax Credit (CTC), Additional Child Tax Credit (ACTC), Child and Dependent Care Tax Credit (CDCTC), Earned Income Tax Credit (EITC), American Opportunity Tax Credit (AOTC), Lifetime Learning Tax Credit (LLTC) and Other Dependent Tax Credit (ODTC).

The federal income tax system supports families by reducing their tax liabilities, and thus increasing their after-tax incomes, in a number of different ways. Principally, this support takes the form of certain deductions and credits being made available only to taxpayers with children or other dependents. This paper discusses major tax provisions that support typical families under current law, the number of families that benefit from these provisions, and the degree to which they benefit from these provisions.1

On December 22, 2017, President Trump signed Public Law 115-97, commonly referred to as the Tax Cuts and Jobs Act of 2017 (TCJA).2 In addition to lowering corporate tax rates and changing the taxation of business income, the TCJA made substantial changes to tax provisions that support families. In brief, the TCJA increased the standard deduction for all family types and effectively eliminated the personal and dependent exemptions.3 The TCJA increased the maximum value of the child credit (CTC) and the additional child credit (ACTC), and it created a new credit for dependents who do not qualify for the child credit, the other dependent credit (ODTC). Many of these changes became effective after December 31, 2017, and expire after December 31, 2025. The TCJA did not directly affect the American opportunity tax credit (AOTC), the child and dependent care credit (CDCTC), or, with the exception of changes to the rules about indexing certain tax parameters for inflation, the earned income tax credit (EITC) and the lifetime learning credit (LLTC).

The paper begins in section 1 with a description of current law for the main provisions affecting families. Section 1 also includes a large set of tables showing estimates of the benefits to families from these provisions. Section 2 presents figures showing the stylized marginal tax rates, average tax rates, and the tax support for dependents under current law. Section 3 concludes. A brief appendix with tables summarizing parameters and eligibility requirements for key provisions follows after the conclusion.

1. Description and Analysis of the Main Tax Provisions Supporting Families with Children and Other Dependents.

The main provisions that support families with children and other dependents are (1) the increased standard deduction and wider tax brackets allowed to unmarried individuals who file as a heads of household and (2) a set of targeted credits. This section describes these provisions and summarizes the benefits from each for families by the size of their adjusted gross income (AGI). Except where noted, parameters are indexed for inflation, and all estimated amounts are for Tax Year 2019.4 The estimates are produced by Treasury's Individual Tax Model (ITM), which takes a stratified random sample of tax returns from a base year, forecasts the values of line items on the tax returns for 2019, and applies a very detailed tax calculator to analyze how changes in the tax system affect tax liability. For any given provision, the amount of benefit shown in Tables 1-7 is calculated by comparing estimated tax liability to what estimated tax liability would have been in absence of the provision (but with the law otherwise unchanged). Because the TCJA is relatively new and many of its provisions sunset, differences from prior law are highlighted in the text and summarized in the appendix.

1.1 Head of household filing status

Unmarried taxpayers who maintain a home for a child or other dependent5 may be eligible to file as a head of household, instead of as a single filer.6 Head of household status has a higher standard deduction, and income is taxed under a separate rate bracket structure that is more generous than the brackets available to single filers.7 These two provisions reduce a head of household filer's tax liability (before credits) compared to what it would be if the taxpayer filed as a single filer.

Table 1 shows the distribution of the benefit of head of household filing status by AGI.8 An estimated 22.9 million families will file head of household returns in 2019. Among these returns, an estimated 13.5 million families receive $14.8 billion in benefits, with an average benefit of $1,092.

The average value of head of household filing status rises with AGI across much of the income distribution.9 Among head of household filers who benefit from using this filing status, the average benefit is $626 for families with AGI of $50,000 or less, peaks at $2,312 for families with AGI between $75,000 and $100,000, and is $2,085 for families with AGI of $100,000 or more. Nearly all (95%) of families using head of household status with income of $30,000 or more benefit from this status. In contrast, only 25% of head of household families with incomes below $30,000 benefit from filing this way.10 Seventy-six percent of head of household families (60% of families benefitting) have incomes of $50,000 or less.

1.2 Child credit (CTC), additional child tax credit (ACTC) and the other dependent credit (ODTC)

Taxpayers may be eligible for a partially refundable CTC of $2,000 for each dependent child under age 17 who has a social security number (SSN). In general, the CTC is non-refundable, but taxpayers with insufficient tax liability to claim the entire CTC may claim the refundable ACTC, which equals 15% of earned income in excess of $2,500, up to the lesser of (1) the value of the unused portion of the child credit and (2) $1,400 per child. Taxpayers may also be eligible for a non-refundable ODTC of up to $500 for each qualifying dependent relative or child who is not eligible for the CTC. Thus, dependent children between the ages of 17 and 23 who have aged out of the CTC, younger children who do not have an SSN, and dependent relatives are all eligible for the ODTC. The family's total CTC and ODTC phase out beginning at $200,000 of modified AGI ($400,000 for married couples filing a joint return). The maximum ACTC amount of $1,400 is indexed for inflation so that, over time, it will increase.11 Even with indexation the ACTC may never exceed $2,000. No other CTC, ODTC or ACTC parameters are indexed.

Table 2 shows the combined benefit from the CTC, ACTC, and ODTC. An estimated 49.5 million taxpayers receive $121.1 billion in benefits, with an average benefit of $2,448. Table 2A shows the distribution of benefits by AGI for the combined CTC and ACTC. An estimated 39.4 million families receive $88.1 billion in benefits from the combined CTC and ACTC, with an average benefit of $2,234. Table 2B separately shows the benefits from the refundable portion (the ACTC). An estimated 22.0 million families receive $38.2 billion in benefits from the ACTC, with an average benefit of $1,740. Fifty six percent of the total number of families benefitting from the child credit receives at least some of their total child credit as a refund, and 43% of the total benefits received are refunded.12

Table 2C shows the distribution of benefits by AGI for the ODTC alone. An estimated 15.4 million taxpayers receive $9.7 billion in benefits, with an average benefit of $628. Table 2D shows the distribution of the benefits lost to families due to the provision under the TCJA that restricts the CTC and the ACTC to children with SSNs. In 2019 an estimated 1.6 million families whose children do not have SSNs will pay an average of $4.1 billion more in taxes — an average increase of $2,526 relative to what they would have paid in absence of this new restriction.

The TCJA made the following changes to the CTC, ACTC, and ODTC for 2019. All comparisons are made against what the law would have been in 2019 absent the changes made by the TCJA.

  • Under the TCJA, the maximum CTC is $2,000 in 2019, compared to $1,000 under prior law.

  • Under the TCJA, the maximum ACTC is $1,400 in 2019, compared to $1,000 under prior law.

  • Under the TCJA, the maximum ACTC is indexed for inflation. It is not indexed for inflation under prior law.

  • Under the TCJA, to qualify for the ACTC, the taxpayer must have $2,500 of earnings in 2019, compared to $3,000 under prior law.

  • Under the TCJA, dependents with Individual Taxpayer Identification Numbers (ITINs) are not eligible for the CTC or the ACTC. They are eligible under prior law.

  • Under the TCJA, personal and dependent exemptions have effectively been eliminated. They would have been worth $4,250 in 2019 under prior law. The TCJA created the $500 non-refundable ODTC, which largely replaces the tax benefits lost from the effective elimination of dependent exemptions.

  • Under the TCJA, the family's total CTC and ODTC is phased out beginning at $200,000 ($400,000 in the case of a joint return). Under prior law, the CTC phased out beginning at $75,000 ($110,000 in the case of a joint return).

These provisions of the TCJA sunset at the end of 2025, after which these provisions revert to prior law.

1.3 Earned income tax credit (EITC)

Taxpayers may be eligible for a refundable EITC. The amount of EITC a taxpayer may receive initially increases as the taxpayer earns more income, then remains constant over a range of earned income, and then decreases as earned income increases further. The credit phases out based on the greater of (1) earned income and (2) AGI.

The credit begins to phase out at a higher income level for married taxpayers. The intention of this is to counteract work disincentives faced by the secondary earner. This benefit is known as EITC marriage penalty relief.

The major parameters of the EITC are indexed for inflation.

The credit is more generous for families with more children.13,14 Taking the one-child case as an example, in 2019, the credit phases in at a rate of 34% of income up to $10,370, yielding a maximum credit of $3,526. Beginning at $19,030 of income ($24,820 for joint filers), the credit begins phasing down at a rate of 15.98%, phasing out completely at incomes over $41,094 ($46,884 for joint filers). In 2019, the maximum EITC for taxpayers without children is $529, while the maximum EITC for taxpayers with 3 or more children is $6,557.

Children may qualify the taxpayer for the EITC even if the children are self-supporting so long as the other qualifying child requirements (relationship of the children to the taxpayer, how long and with whom the children reside during the year, age of the children, and whether the children have an SSN) are met. In general, a qualifying child must be under 19 years of age. However, the age limit is extended to under 24 for full-time students15 and eliminated for children who are permanently and totally disabled.

Table 3 shows the distribution of the EITC by AGI. An estimated 27.9 million families receive $69.6 billion in benefits, with an average benefit of $2,493. Table 3A shows the benefit to married couples from EITC marriage penalty relief. An estimated 4.5 million families receive $3.7 billion in benefits, with an average benefit of $824. Table 3B shows the benefit to families from the EITC for qualifying children who are over age 18. An estimated 3.3 million families receive $7.3 billion in benefits, with an average benefit of $2,211.

The EITC is substantially more generous to families with children. Tables 3C and 3D show the benefit to families from the EITC separately for families with qualifying children and without qualifying children, respectively. An estimated 20.6 million families receive $67.3 billion in EITC benefits, with an average benefit of $3,276. In contrast, an estimated 7.3 million families and individuals without qualifying children receive $2.3 billion in EITC benefits, with an average benefit of $308.

The TCJA made the following changes to the EITC for 2019. All comparisons are made against what the law would have been in 2019 absent the changes made by the TCJA.

  • The EITC is now indexed by the chained CPI, which results in a slightly smaller annual increase than would have occurred under prior law. This change is permanent.

1.4 Child and dependent care credit (CDCTC)

Taxpayers with expenses for caring for a qualifying individual, which may be a child or an adult, may be eligible for the non-refundable CDCTC. The credit is generally available for working taxpayers with dependent children under age 13, but it is also available for working taxpayers supporting parents or other dependents needing care.16

The maximum credit is for 35% of up to $3,000 of child care expenses in the case of 1 child and expenses of up to $6,000 in the case of 2 or more children. The credit rate phases down beginning at incomes of $15,000 until the rate reaches 20% at incomes above $43,000. The CDCTC parameters are not indexed for inflation.

Table 4 shows the distribution of this credit by AGI.17 An estimated 5.9 million families receive $3.2 billion in benefits, with an average benefit of $551.18

The CDCTC is unchanged by TCJA. Because the CDCTC is non-refundable, to the extent that low- to moderate-income families face a lower tax liability before credits because of the increase in the standard deduction and reduced tax rates from the TCJA, they will receive less CDCTC.

1.5 Education Credits: American opportunity credit (AOTC) and lifetime learning credit (LLTC)

Taxpayers with expenses related to their or their dependent children's post-secondary education may be eligible for the partially refundable AOTC or the non-refundable LLTC. In any given year, a taxpayer may only claim one of these credits for each student in the family for whom there are education expenses.19

To be eligible for the AOTC, the student must attend a post-secondary school at least half-time (and be enrolled in a degree or certificate program). For the AOTC, taxpayers may claim 100% of the first $2,000 of qualified expenses and 25% of the next $2,000 of expenses. Forty percent of the otherwise-allowable credit is refundable. Thus, taxpayers may claim an AOTC of up to $2,500 per student, up to $1,000 of which is refundable. The credit phases out beginning at $80,000 of modified AGI ($160,000 for joint filers) and is available for up to 4 years. None of the parameters of the AOTC, including the phase-out thresholds, is adjusted for inflation.

Taxpayers may also claim a LLTC for 20% of up to $10,000 of tuition and required fees per return per year. The LLTC is available to part-time students. The credit phases out beginning at $58,000 of modified AGI ($116,000 for joint filers), and there is no limit on the number of years that a student is eligible for the LLTC. Only the phase-out thresholds for the LLTC are indexed for inflation.

Table 5 shows the distribution of benefits from the combined AOTC and LLTC by AGI.20 An estimated 12.9 million families receive $20.3 billion in benefits, with an average benefit of $1,576. Table 5A shows that an estimated 3.1 million families receive $2.6 billion in benefits from the LLTC, with an average benefit of $831. Table 5B shows that an estimated 9.9 million families receive $12.4 billion in benefits from the AOTC, with an average benefit of $1,243. Table 5C shows that of these 9.9 million families, 6.1 million receive $5.8 billion in benefits in excess of their tax liability. The average benefit for this refundable portion of the AOTC was $941.21 In absence of the AOTC, some families currently benefitting from this credit would switch to claiming the LLTC. The amount the benefit from the AOTC is thus the amount they receive in excess of the available benefit from the LLTC.22 As a result, the amounts shown in Table 5 are less than the sum of the amounts in Tables 5B and 5C.

The TCJA made the following changes to the AOTC and the LLTC for 2019. All comparisons are made against what the law would have been in 2019 absent the changes made by the TCJA.

  • The TCJA changed permanently how the phase-out thresholds of the LLTC are indexed by switching to the chained CPI. This results in a slightly smaller annual increase than would have occurred under prior law. The credits are otherwise unchanged. However, because the AOTC is partially refundable and the LLTC is non-refundable, to the extent that low- to moderate-income families face a lower tax liability before credits because of the increase in the standard deduction and reduced tax rates from the TCJA, they will receive less AOTC and LLTC.

1.6 Summary Tables

The tables presented so far in this section show the tax benefit from the main family-related provisions, taken one at a time. Table 6 shows the total number of families who benefit from at least one of the seven credits discussed.23 An estimated 64.1 million families receive $215.9 billion in benefit, with an average benefit from the credits of $3,366. Families with AGI of $50,000 or below receive an average benefit of $3,468, and families earning more than $500,000 (above the phase-out range for most credits) receive an average benefit of $658.

Table 7 summarizes the information presented in Tables 1 through 6, with additional focus on the key features of the major provisions. For example, the benefit from EITC marriage penalty relief (row 3A) and the loosening of the age requirement for students and the disabled (row 3B) are shown separately from total EITC (row 3).

Table 8 presents the estimated number of credits claimed and the amounts claimed for the main family-related provisions. In some cases, the number of families benefiting (or the amount of benefit received) is smaller than the number of claimants (or the amount claimed) for a particular provision. This difference occurs in cases where some families would have chosen an alternate credit if the one under consideration were repealed. For example, in absence of the CTC, nearly all current claimants would switch to the ODTC. At most, taxpayers would see their taxes increase by $1,500 and not the full $2,000 per child.24

2. Marginal and Average Tax Rates and Tax Support for Families with Children

To understand better how the provisions of the tax code collectively affect families of different sizes and incomes, this section presents estimates of (1) the average income tax rate (tax liability after credits divided by AGI), (2) a stylized marginal tax rate, and, for families with children, (3) the tax benefits provided to the family because of the presence of the children. The figures contained in this section are illustrative and do not account for specific circumstances of any actual family. The estimates are based on the tax law for 2019.

In order to produce these figures, a number of simplifying assumptions about the families are made. First, all income comes from wages, and families are only eligible for the benefits listed in section 1. Second, 15% of family income is spent on items that qualify for an itemized deduction.25 Examples of such items include mortgage interest expenses, state and local income and property tax payments, and charitable contributions. Third, taxpayers choose to itemize their deductions or claim the standard deduction in order to minimize their tax liability.

The second and third assumptions have an important implication when trying to interpret the figures that follow. The lines labeled “stylized marginal tax rate” are calculated as follows. At each AGI level, the taxpayer is given an extra $1,000 of wages.26 The second assumption implies the taxpayer therefore has an additional $150 of itemizable expenses. The taxpayer, by the third assumption, re-determines whether to itemize deductions or claim the standard deduction. Taxable income — in this case wages less either the standard deduction or itemized deductions — is then recalculated, and the relevant tax rates and credits are applied to determine the tax liability.27 The difference in liability is divided by the $1,000 change in income to get a stylized marginal tax rate.

Figure 1 presents the stylized marginal tax rate and average tax rate faced by a single filer. The stylized marginal tax rate deviates from the statutory marginal rate schedule due to the EITC at low income levels and the switch to itemization at higher income levels. The EITC decreases the stylized marginal tax rate as the credit phases in and increases it as the credit phases out.

Figure 2 presents on the left axis the stylized marginal tax rate and average income tax rate faced by a married filer with one dependent child but no child care expenses. The figure presents on the right axis the amount of tax support the family receives as a result of the child. The stylized marginal tax rate is large and negative as the EITC and ACTC phase in and is large and positive as the EITC phases out. If this figure were continued on for higher income families, there would be a temporary increase in the stylized marginal tax rate as the CTC begins to phase out at $400,000.

Figure 2A presents the same information but focuses on families with low and modest incomes who are not able to claim the full child credit. This figure decomposes the total tax support for the child into the contribution of the CTC (green), the ACTC (gray), and the EITC (blue).28 Families with the lowest incomes will receive less than the full value of the CTC due to insufficient income, and the benefit to families with slightly more income is constrained by the $1,400 limit on the credit's refundability.

Figure 3 replicates Figure 2 for a head of household filer with one dependent child but no childcare expenses. The stylized marginal tax rate shares all of the key features seen in Figure 2, but with a less generous underlying statutory marginal rate schedule and credits that phase out at lower income levels. The amount of tax support for this family type includes the added element that the child creates eligibility for head of household status — and thus a more generous rate schedule than applies to other unmarried taxpayers. The portion of the tax support due to the difference in schedules is shown in a lighter shade than the portion due to the remaining child-related provisions.

Figure 4 presents the stylized marginal tax rate and average tax rate faced by a married couple with a dependent student who is assumed to have sufficient education expenses to qualify for the maximum amount of the AOTC. The figure also presents the amount of tax support the filer receives as a result of the student. Key differences between this figure and Figure 2 are the large initial benefit from the refundable portion of the AOTC, which affects tax support but not stylized marginal rates; eligibility for the ODTC instead of the CTC and ACTC; and high stylized marginal tax rates as the AOTC phases out.

Figure 5 presents the stylized marginal tax rate and average tax rate faced by a joint filer with one dependent child and sufficient child care expenses to qualify for the maximum CDCTC. The figure also presents the amount of tax support the filer receives as a result of the child. Key differences between this figure and Figure 2 are the higher marginal rates for taxpayers earning modest incomes as the CDCTC phases down and the additional benefit from this credit for taxpayers at all but the lowest levels of income.

3. Conclusion

This paper has presented an overview of the main tax provisions that provide tax support to typical American families with children and other dependents under current tax law. The benefit to families from each of the provisions (and sometimes select features of a provision) are presented by the taxpayer's AGI. Estimated counts and dollar amounts of claims for the provisions (and sometimes select features of a provision) are presented for all taxpayers. Finally, select stylized marginal tax rates and average tax rates that illustrate key figures of the main tax benefits to families are presented.


Tax Support for Families under Current Law
Tables and Figures
2019 Law

Section 1: Description and Analysis of the Main Tax Provisions Supporting Families with Children and Other Dependents.

The following tables describe the benefit of each of the main provisions affecting families, by AGI under the TCJA for 2018. An additional table shows the estimated number of claimants for each provision.

Table 1. Estimated Benefit from Head of Household Filing Status

Table 2. Estimated Benefit from the Child Credit (CTC), Additional Child Credit (ACTC) and Other Dependent Credit (ODTC)

Table 2A. Estimated Benefit from the CTC and ACTC Table 2B. Estimated Benefit from the ACTC Table 2C. Estimated Benefit from the ODTC

Table 2D. Estimated Tax Increases from the CTC/ACTC Social Security Number Requirement

Table 3. Estimated Benefit from the Earned Income Tax Credit (EITC) Table 3A. Estimated Benefit from the EITC Marriage Penalty Relief

Table 3B. Estimated Benefit from the EITC for Students and Disabled Children Table 3C. Estimated Benefit from the EITC for Families with Children

Table 3D. Estimated Benefit from the EITC for Families and Individuals without Children Table 4. Estimated Benefit from the Child and Dependent Tax Credit (CDCTC)

Table 5. Estimated Benefit from the Education Credits: American Opportunity Credit (AOTC)

and Lifetime Learning Credit (LLTC)

Table 5A. Estimated Benefit from the LLTC

Table 5B. Estimated Benefit from the AOTC

Table 5C. Estimated Benefit from the Refundability of the AOTC Table 6. Estimated Benefit from All Credits in Tables 2-5 Table 7. Summary Table of Estimated Benefits

Table 8. Number of Claims and Total Amounts Claimed for the Main Family Provisions Table A1. Tax Rates and Tax Brackets under Current Law

Table A2. Summary of Eligibility Requirements for CTC, ACTC, ODTC, and EITC.

Section 2. Stylized Marginal and Average Tax Rates and Tax Support for Families with Children

Marginal and average tax rates vary greatly as income increases due to the interaction of the tax schedules and the family credits. These figures show the “skylines” and the tax support for a child for a set of typical family types.

Figure 1. Stylized Marginal and Average Tax for Single Filer with No Dependent Children or Dependents

Figure 2. Stylized Marginal and Average Tax for a Joint Filer with One Dependent Child under 17

Figure 2A. A Focus on Low Income Families: Joint Filer with One Dependent Child under 17

Figure 3. Stylized Marginal and Average Tax for a Head of Household Filer with One Dependent Child under 17

Figure 4. Stylized Marginal and Average Tax for a Joint Filer with One Dependent Child in College

Figure 5. Stylized Marginal and Average Tax for a Joint Filer with One Dependent Child under 13 and Qualified Expenses for the CDCTC

Table 1
Estimated Benefit from
Head of Household (HoH) Filing Status
Tax Year 2019

Adjusted Gross Income

Families Filing HoH (Thousands)

Families Benefiting (Thousands)

Total Benefit ($Millions)

Average Benefit ($)

0 <= 15,000

4,249

26

3

111

15,000 <= 30,000

7,501

2,892

1,253

433

30,000 <= 40,000

3,441

3,041

2,182

718

40,000 <= 50,000

2,281

2,203

1,674

760

50,000 <= 60,000

1,546

1,519

1,520

1,001

60,000 <= 75,000

1,389

1,380

2,721

1,972

75,000 <= 100,000

1,242

1,240

2,868

2,312

100,000 <= 200,000

1,012

1,010

2,139

2,118

200,000 <= 500,000

173

170

326

1,914

500,000 <= 1000,000

26

26

52

2,025

1,000,000 <= 5,000,000

12

12

22

1,935

5,000,000 < * * *

1

1

2

1,824

Total1

22,929

13,521

14,763

1,092

Office of Tax Analysis

  

Feb 08, 2019

1 Returns with negative income are excluded from the lowest income class but included in the total line. Dependent returns are excluded from the calculations. Returns with a tax change of at least $5 are included in the calculations.

Table 2
Estimated Benefit from
Child Tax Credit (CTC), Additional Child Tax Credit (ACTC) and Other Dependent Credit (ODTC)
Tax Year 2019

Adjusted Gross Income

Families Benefiting (Thousands)

Total Benefit ($Millions)

Average Benefit ($)

0 <= 15,000

4,981

5,570

1,118

15,000 <= 30,000

10,098

19,712

1,952

30,000 <= 40,000

5,254

13,051

2,484

40,000 <= 50,000

4,146

11,389

2,747

50,000 <= 60,000

3,319

9,112

2,745

60,000 <= 75,000

3,859

10,869

2,817

75,000 <= 100,000

5,066

14,424

2,847

100,000 <= 200,000

9,344

27,278

2,919

200,000 <= 500,000

3,303

9,507

2,878

500,000 <= 1,000,000

11

11

1,034

1,000,000 <= 5,000,000

0

0

0

5,000,000 < * * *

0

0

0

Total1

49,449

121,061

2,448

Office of Tax Analysis

  

Feb 08, 2019

1 Returns with negative income are excluded from the lowest income class but included in the total line. Dependent returns are excluded from the calculations. Returns with a tax change of at least $5 are included in the calculations.

Table 2A
Estimated Benefit from
Child Tax Credit (CTC) and Additional Child Tax Credit (ACTC)
Tax Year 2019

Adjusted Gross Income

Families Benefiting2 (Thousands)

Total Benefit ($Millions)

Average Benefit ($)

0 <= 15,000

4,892

5,513

1,127

15,000 <=

8,657

16,927

1,955

30,000 <=

4,037

9,248

2,291

40,000 <=

3,139

7,779

2,478

50,000 <=

2,463

6,144

2,494

60,000 <=

2,868

7,368

2,569

75,000 <= 100,000

3,816

9,831

2,576

100,000 <= 200,000

6,986

18,609

2,664

200,000 <= 500,000

2,497

6,543

2,620

500,000 <= 1,000,000

11

11

1,034

1,000,000 <= 5,000,000

0

0

0

5,000,000 < * * *

0

0

0

Total1

39,434

88,107

2,234

Office of Tax Analysis

  

Feb 08, 2019

1 Returns with negative income are excluded from the lowest income class but included in the total line. Dependent returns are excluded from the calculations. Returns with a tax change of at least $5 are included in the calculations.

2 SSN Requirement remains in place.

Table 2B
Estimated Benefit from
Refundability of Additional Child Tax Credit (ACTC)
Tax Year 2019

Adjusted Gross Income

Families Benefiting (Thousands)

Total Benefit ($Millions)

Average Benefit ($)

0 <= 15,000

4,890

5,508

1,126

15,000 <= 30,000

8,647

16,470

1,905

30,000 <= 40,000

3,758

7,274

1,936

40,000 <= 50,000

2,138

4,511

2,109

50,000 <= 60,000

1,217

2,237

1,839

60,000 <= 75,000

820

1,439

1,755

75,000 <= 100,000

342

495

1,448

100,000 <= 200,000

79

141

1,778

200,000 <= 500,000

4

9

2,321

500,000 <= 1,000,000

0

0

605

1,000,000 <= 5,000,000

0

0

0

5,000,000 < * * *

0

0

0

Total1

21,962

38,215

1,740

Office of Tax Analysis

 

Feb 08, 2019

1 Returns with negative income are excluded from the lowest income class but included in the total line. Dependent returns are excluded from the calculations. Returns with a tax change of at least $5 are included in the calculations.

Table 2C
Estimated Benefit from
Other Dependent Tax Credit
Tax Year 2019

Adjusted Gross Income

Families Benefiting (Thousands)

Total Benefit ($Millions)

Average Benefit ($)

0 <= 15,000

82

11

140

15,000 <= 30,000

1,645

734

446

30,000 <= 40,000

1,795

1,161

647

40,000 <= 50,000

1,613

1,073

665

50,000 <= 60,000

1,386

934

674

60,000 <= 75,000

1,606

1,047

652

75,000 <= 100,000

2,063

1,325

642

100,000 <= 200,000

3,841

2,470

643

200,000 <= 500,000

1,373

925

674

500,000 <= 1,000,000

2

0

81

1,000,000 <= 5,000,000

0

0

0

5,000,000 < * * *

0

0

0

Total1

15,405

9,681

628

Office of Tax Analysis

 

Feb 08, 2019

1 Returns with negative income are excluded from the lowest income class but included in the total line. Dependent returns are excluded from the calculations. Returns with a tax change of at least $5 are included in the calculations.

Table 3
Estimated Benefit from
Earned Income Tax Credit (EITC)
Tax Year 2019

Adjusted Gross Income

Families Benefiting2 (Thousands)

Total Benefit ($Millions)

Average Benefit ($)

0 <= 15,000

12,052

20,288

1,683

15,000 <= 30,000

9,569

38,303

4,003

30,000 <= 40,000

4,064

8,601

2,117

40,000 <= 50,000

1,850

2,166

1,171

50,000 <= 60,000

272

125

459

60,000 <= 75,000

0

0

0

75,000 <= 100,000

0

0

0

100,000 <= 200,000

0

0

0

200000 <= 500000

0

0

0

500000 <= 1000000

0

0

0

1000000 <= 5000000

0

0

0

5000000 < * * *

0

0

0

Total1

27,920

69,595

2,493

Office of Tax Analysis

 

Feb. 11, 2019

1 Returns with negative income are excluded from the lowest income class but included in the total line. Dependent returns are excluded from the calculations. Returns with a tax change of at least $5 are included in the calculations.

2 In 2019, the phase-out range of the EITC for joint filers begins at incomes $5,790 higher than for other filers ($5,800 for joint filers without children).

Table 3A
Estimated Benefit from
EITC Marriage Penalty Relief
Tax Year 2019

Adjusted Gross Income

Families Benefiting2 (Thousands)

Total Benefit ($Millions)

Average Benefit ($)

0 <= 15,000

337

107

317

15,000 <= 30,000

1,614

1,152

714

30,000 <= 40,000

1,178

1,289

1,094

40,000 <= 50,000

1,084

1,027

948

50,000 <= 60,000

271

125

461

60,000 <= 75,000

0

0

0

75,000 <= 100,000

0

0

0

100,000 <= 200,000

0

0

0

200,000 <= 500,000

0

0

0

500,000 <= 1,000,000

0

0

0

1,000,000 <= 5,000,000

0

0

0

5,000,000 < * * *

0

0

0

Total1

4,497

3,707

824

Office of Tax Analysis

 

Feb 11, 2019

1 Returns with negative income are excluded from the lowest income class but included in the total line. Dependent returns are excluded from the calculations. Returns with a tax change of at least $5 are included in the calculations.

2 In 2019, the phase-out range of the EITC for joint filers begins at incomes $5,790 higher than for other filers ($5,800 for joint filers without children).

Table 3B
Estimated Benefit from
EITC for Students and Disabled Adults
(EITC Qualifying Children Aged 19 to 23 and the Disabled Aged 19 and Up)
Tax Year 2019

Adjusted Gross Income

Families Benefiting2,3 (Thousands)

Total Benefit ($Millions)

Average Benefit ($)

0 <= 15,000

703

1,748

2,487

15,000 <= 30,000

1,415

4,015

2,837

30,000 <= 40,000

810

1,247

1,539

40,000 <= 50,000

332

279

839

50,000 <= 60,000

47

19

412

60,000 <= 75,000

0

0

0

75,000 <= 100,000

0

0

0

100,000 <= 200,000

0

0

0

200,000 <= 500,000

0

0

0

5,00000 <= 1,000,000

0

0

0

1,000,000 <= 5,000,000

0

0

0

5,000,000 < * * *

0

0

0

Total1

3,313

7,326

2,211

Office of Tax Analysis

  

Feb 11, 2019

1 Returns with negative income are excluded from the lowest income class but included in the total line. Dependent returns are excluded from the calculations. Returns with a tax change of at least $5 are included in the calculations.

2 In 2019, the phase-out range of the EITC for joint filers begins at incomes $5,790 higher than for other filers ($5,800 for joint filers without children).

3 In general, a qualifying child must be under 19 years of age. Exceptions are in place for full-time students and the disabled. The age limit is extended to under 24 for full-time students. A full-time student is an individual who during each of five calendar months during the year was a full-time student at an educational organization broadly defined, or certain farm-related programs. Educational organizations includes many types of schooling beyond traditional college. Full-time is defined by the educational organization. (In general, it corresponds to at least twelve credits hours or the equivalent.) Children who are permanently and totally disabled face no age limitation for the EITC.

Table 3C
Estimated Benefit from
Earned Income Tax Credit (EITC) for Families with Children
Tax Year 2019

Adjusted Gross Income

Families Benefiting2,3 (Thousands)

Total Benefit ($Millions)

Average Benefit ($)

0 <= 15,000

5,341

18,124

3,393

15,000 <= 30,000

8,998

38,220

4,248

30,000 <= 40,000

4,064

8,601

2,117

40,000 <= 50,000

1,850

2,166

1,171

50,000 <= 60,000

272

125

459

60,000 <= 75,000

0

0

0

75,000 <= 100,000

0

0

0

100,000 <= 200,000

0

0

0

200,000 <= 500,000

0

0

0

500,000 <= 1,000,000

0

0

0

1,000,000 <= 5,000,000

0

0

0

5,000,000 < * * *

0

0

0

Total1

20,555

67,329

3,276

Office of Tax Analysis

 

Feb 11, 2019

1 Returns with negative income are excluded from the lowest income class but included in the total line. Dependent returns are excluded from the calculations. Returns with a tax change of at least $5 are included in the calculations.

2 In 2019, the phase-out range of the EITC for joint filers begins at incomes $5,790 higher than for other filers ($5,800 for joint filers without children).

3 In general, a qualifying child must be under 19 years of age. Exceptions are in place for full-time students and the disabled. The age limit is extended to under 24 for full-time students. A full-time student is an individual who during each of five calendar months during the year was a full-time student at an educational organization broadly defined, or certain farm-related programs. Educational organizations includes many types of schooling beyond traditional college. Full-time is defined by the educational organization. (In general, it corresponds to at least twelve credits hours or the equivalent.) Children who are permanently and totally disabled face no age limitation for the EITC.

Table 3D
Estimated Benefit from
Earned Income Tax Credit (EITC) for Adults without Children
Tax Year 2019

Adjusted Gross Income

Families Benefiting2, 3 (Thousands)

Total Benefit ($Millions)

Average Benefit ($)

0 <= 15,000

6,711

2,163

322

15,000 <= 30,000

571

82

144

30,000 <= 40,000

0

0

0

40,000 <= 50,000

0

0

0

50,000 <= 60,000

0

0

0

60,000 <= 75,000

0

0

0

75,000 <= 100,000

0

0

0

100,000 <= 200,000

0

0

0

200,000 <= 500,000

0

0

0

500,000 <= 1,000,000

0

0

0

1,000,000 <= 5,000,000

0

0

0

5,000,000 < * * *

0

0

0

Total1

7,365

2,265

308

Office of Tax Analysis

 

Feb 11, 2019

1 Returns with negative income are excluded from the lowest income class but included in the total line. Dependent returns are excluded from the calculations. Returns with a tax change of at least $5 are included in the calculations.

2 In 2019, the phase-out range of the EITC for joint filers begins at incomes $5,790 higher than for other filers ($5,800 for joint filers without children).

3 In general, a qualifying child must be under 19 years of age. Exceptions are in place for full-time students and the disabled. The age limit is extended to under 24 for full-time students. A full-time student is an individual who during each of five calendar months during the year was a full-time student at an educational organization broadly defined, or certain farm-related programs. Educational organizations includes many types of schooling beyond traditional college. Full-time is defined by the educational organization. (In general, it corresponds to at least twelve credits hours or the equivalent.) Children who are permanently and totally disabled face no age limitation for the EITC.

Table 4
Estimated Benefit from
Child and Dependent Care Tax Credit
Tax Year 2019

Adjusted Gross Income

Families Benefiting (Thousand)

Total Benefit ($Millions)

Average Benefit ($)

0 <= 15,000

1

1

1,000

15,000 <= 30,000

203

66

323

30,000 <= 40,000

560

261

466

40,000 <= 50,000

529

282

532

50,000 <= 60,000

441

251

568

60,000 <= 75,000

541

294

544

75,000 <= 100,000

848

481

568

100,000 <= 200,000

1,900

1,118

588

200,000 <= 500,000

750

423

564

500,000 <= 1,000,000

88

52

593

1,000,000 <= 5,000,000

22

14

641

5,000,000 < * * *

1

1

688

Total1

5,886

3,244

551

Office of Tax Analysis

 

Feb 11, 2019

1 Returns with negative income are excluded from the lowest income class but included in the total line. Dependent returns are excluded from the calculations. Returns with a tax change of at least $5 are included in the calculations.

Table 5
Estimated Benefit from
American Opportunity Credit (AOTC) and Lifetime Learning Credit (LLTC)
Tax Year 2019

Adjusted Gross Income

Families Benefiting (Thousands)

Total Benefit ($Millions)

Average Benefit ($)

0 <= 15,000

2,314

2,192

947

15,000 <= 30,000

3,018

3,812

1,263

30,000 <= 40,000

1,434

2,198

1,533

40,000 <= 50,000

1,181

2,137

1,809

50,000 <= 60,000

849

1,599

1,883

60,000 <= 75,000

918

1,833

1,997

75,000 <= 100,000

1,160

2,371

2,043

100,000 <= 200,000

1,997

4,164

2,085

200,000 <= 500,000

0

0

0

500,000 <= 1,000,000

0

0

0

1,000,000 <= 5,000,000

0

0

0

5,000,000 < * * *

0

0

0

Total1

12,912

20,349

1,576

Office of Tax Analysis

 

Feb 14, 2019

1 Returns with negative income are excluded from the lowest income class but included in the total line. Dependent returns are excluded from the calculations. Returns with a tax change of at least $5 are included in the calculations.

Table 5A
Estimated Benefit from
Lifetime Learning Credit
Tax Year 2019

Adjusted Gross Income

Families Benefiting (Thousands)

Total Benefit ($Millions)

Average Benefit ($)

0 <= 15,000

136

17

127

15,000 <= 30,000

645

417

646

30,000 <= 40,000

443

388

877

40,000 <= 50,000

406

407

1,003

50,000 <= 60,000

330

328

996

60,000 <= 75,000

316

253

800

75,000 <= 100,000

374

393

1,051

100,000 <= 200,000

494

409

829

200,000 <= 500,000

0

0

0

500,000 <= 1,000,000

0

0

0

1,000,000 <= 5,000,000

0

0

0

5,000,000 < * * *

0

0

0

Total1

3,144

2,613

831

Office of Tax Analysis

 

Feb 14, 2019

1 Returns with negative income are excluded from the lowest income class but included in the total line. Dependent returns are excluded from the calculations. Returns with a tax change of at least $5 are included in the calculations.

Table 5B
Estimated Benefit from
American Opportunity Tax Credit
Tax Year 2019

Adjusted Gross Income

Families Benefiting2 (Thousands)

Total Benefit ($Millions)

Average Benefit ($)

0 <= 15,000

2,179

2,133

979

15,000 <= 30,000

2,372

2,475

1,043

30,000 <= 40,000

994

1,100

1,106

40,000 <= 50,000

784

893

1,139

50,000 <= 60,000

542

643

1,186

60,000 <= 75,000

637

1,003

1,575

75,000 <= 100,000

833

1,124

1,348

100,000 <= 200,000

1,565

2,948

1,884

200,000 <= 500,000

0

0

0

500,000 <= 1,000,000

0

0

0

1,000,000 <= 5,000,000

0

0

0

5,000,000 < * * *

0

0

0

Total1

9,944

12,360

1,243

Office of Tax Analysis

 

Feb 14, 2019

1 Returns with negative income are excluded from the lowest income class but included in the total line. Dependent returns are excluded from the calculations. Returns with a tax change of at least $5 are included in the calculations.

2 In absence of the AOTC, some taxpayers would claim the LLTC instead.

Table 5C
Estimated Benefit from
American Opportunity Tax Credit Refundability
Tax Year 2019

Adjusted Gross Income

Families Benefiting2 (Thousands)

Total Benefit ($Millions)

Average Benefit ($)

0 <= 15,000

2,178

2,132

978

15,000 <= 30,000

2,298

2,211

962

30,000 <= 40,000

757

641

848

40,000 <= 50,000

511

434

850

50,000 <= 60,000

208

192

923

60,000 <= 75,000

103

84

811

75,000 <= 100,000

44

41

949

100,000 <= 200,000

11

11

1,057

200000 <= 500000

0

0

0

500,000 <= 1,000,000

0

0

0

1,000,000 <= 5,000,000

0

0

0

5,000,000 < * * *

0

0

0

Total1

6,147

5,787

941

Office of Tax Analysis

 

Feb 14, 2019

1 Returns with negative income are excluded from the lowest income class but included in the total line. Dependent returns are excluded from the calculations. Returns with a tax change of at least $5 are included in the calculations.

2 Even though all 9.9 million families claiming an AOTC claim the 40% of the credit that is refundable, only families with insufficient tax liability to offset their full credit benefit from this refundability. Families that have sufficient tax liability would receive their full credit even without refundability, and are therefore not included among the 6.1 million families benefiting from refundability.

Table 6
Estimated Benefit from All Family Credits
Earned Income Credit (EITC), Child Credit (CTC),
Additional Child Credit (ACTC) Other Dependent Credit (ODTC),
Child and Dependent Care Credit (CDCTC),
Lifetime Learning Credit (LLTC), and American Opportunity Credit (AOTC)
Tax Year 2019

Adjusted Gross Income

Families Benefiting2 (Thousands)

Total Benefit ($Millions)

Average Benefit ($)

0 <= 15,000

13,650

28,068

2,056

15,000 <= 30,000

13,210

62,466

4,729

30,000 <= 40,000

6,221

24,703

3,971

40,000 <= 50,000

4,728

16,246

3,436

50,000 <= 60,000

3,661

11,195

3,058

60,000 <= 75,000

4,129

13,026

3,155

75,000 <= 100,000

5,287

17,284

3,269

100,000 <= 200,000

9,611

32,564

3,388

200,000 <= 500,000

3,330

9,931

2,982

500,000 <= 1,000,000

96

64

661

1,000,000 <= 5,000,000

22

14

641

5,000,000 < * * *

1

1

688

Total1

64,135

215,852

3,366

Office of Tax Analysis

 

Feb 14, 2019

1 Returns with negative income are excluded from the lowest income class but included in the total line. Dependent returns are excluded from the calculations. Returns with a tax change of at least $5 are included in the calculations.

Table 7
Summary of Tax Support for Families
from Main Family-Related Tax Provisions
Tax Year 2019

 

Counts and Amounts of Families who benefit from . . .1

Total Families2 (millions)

Total Value ($billions)

Average Benefit ($)

1

Head of Household Filing Status

13.5

14.8

1,092

2

Child Credit (CTC) and Additional Child Tax Credit (ACTC) and Other Dependent Credit (ODTC)

49.4

121.1

2,448

2A

Child Tax Credit and Additional Child Tax Credit

39.4

88.1

2,234

2B

Additional Child Tax Credit (ACTC) (make ACTC nonrefundable)

22.0

38.2

1,740

2C

Other Dependent Credit

15.4

9.7

628

3

Earned Income Tax Credit (EITC)

27.9

69.6

2,493

3A

EITC Marriage Penalty Relief3

4.5

3.7

824

3B

EITC Students and Disabled (repeal EITC for qualifying children >18)

3.3

7.3

2,211

3C

EITC for Families with Children

20.6

67.3

3.3

3D

EITC for Families with No Children

7.4

2.3

0.3

4

Child and Dependent Care Tax Credit

5.9

3.2

551

5

Education Credits (AOTC and LLTC)

12.9

20.3

1,576

5A

Lifetime Learning Credit (LLTC)

3.1

2.6

831

5B

American Opportunity Tax Credit (AOTC)

9.9

12.4

1,243

5C

Refundability of AOTC4 (make AOTC nonrefundable)

6.1

5.8

941

6

All Major Family and Education Credits5

64.1

215.9

3,366

Office of Tax Analysis

 

February 14, 2019

1 The tax benefits included in this table are the earned income tax credit (EITC), the child credit (CTC), the additional child tax credit (ACTC), the child and dependent care tax credit (CDCTC), the American opportunity tax credit (AOTC), the lifetime learning credit (LLTC) and the other dependent credit (ODTC).

2 Dependent returns are excluded from the calculations. Returns are considered to benefit from a provision (or set of provisions) if income tax liability increases by $5 or more if the provision is (or provisions are) repealed.

3 In 2018, the phaseout range of the EITC for joint filers begins at incomes $5,790 higher than for other filers ($5,800 for joint filers without children).

4 Even though all 9.9 million families claiming an AOTC claim the 40% of the credit that is refundable, only families with insufficient tax liability to offset their full credit benefit from this refundability. Families that have sufficient tax liability would receive their full credit even without refundability, and are therefore not included among the 6.1 million families benefiting from refundability.

5 The tax benefits included in Line 6 are the seven credits listed in fn 1.

Table 8
Number of Families Claiming and Amounts Claimed for Key Family Credits1
Tax Year 2019

Tax Credit (numbers correspond to Tables 2-6)

Number of Families (Millions)

Amount Claimed ($billions)

Average Claimed ($)

2. Total CTC, ACTC and ODTC

50.0

121.7

2,435

2A. Total CTC + ACTC

39.5

110.9

2,807

  • CTC

30.0

72.7

2,423

2B. ACTC

22.0

38.2

1,738

2C. ODTC

17.2

10.8

626

3. Total EITC

28.0

69.6

2,488

3C. EITC for workers with children

20.6

67.3

3,275

3D. EITC for workers without children

7.4

2.3

305

4. Total CDCTC

6.7

3.9

580

5. Total Education Credits

13.1

21.1

1,611

5A. LLTC

3.3

2.8

841

5B. Total AOTC2

9.9

18.2

1,835

  • AOTC nonrefundable portion

7.3

8.6

1,166

5C. AOTC refundable portion

9.9

9.7

974

6. Total EITC, CTC, ACTC & ODTC, CDCTC, & Educ. Credits

64.3

216.2

3,363

Office of Tax Analysis

 

February 14, 2018

1 The tax benefits included in this table are the earned income tax credit (EITC), the child credit (CTC), the additional child tax credit (ACTC), the other dependent credit (ODTC), the child and dependent care tax credit (CDCTC), the American opportunity tax credit (ACTC) and the lifetime learning credit (LLTC). Head of Household filing status is not included. The line numbers correspond to Tables 1-7. Lines that are not numbered (but begin with a bullet) do not correspond to an earlier table.

2 The AOTC is calculated in two pieces: 40% of the otherwise allowable AOTC is refundable and the remaining 60% is not refundable. Thus, all families claiming an AOTC receive the refundable portion of the AOTC but only those families with tax liability to offset are able to claim all or part of the nonrefundable portion of the AOTC. Of the 9.9 million families claiming an AOTC, 6.1 million would receive a smaller credit, or none at all, if the AOTC were not refundable.

Table A1
Tax Rates, and Tax Brackets, and Standard Deduction (SD) under Current Law
for Single, Head of Household and Joint Filers
Tax Year 2019

Marginal Tax Rate

Filing Status

Single Filer (SD = $12,200)

Head of Household Filer (SD = $18,300)

Married Filer (SD = $24,400)

Taxable Income Over . . . ($)

Tax at Beginning of Bracket ($)

Taxable Income Over . . . ($)

Tax at Beginning of Bracket ($)

Taxable Income Over . . . ($)

Tax at Beginning of Bracket ($)

10%

0

0

0

0

0

0

12%

9,700

970

13,850

1,385

19,400

1,940

22%

39,475

4,543

52,850

6,065

78,950

9,086

24%

84,200

14,383

84,200

12,962

168,400

28,765

32%

160,725

32,749

160,700

31,322

321,450

65,497

35%

204,100

46,629

204,100

45,210

408,200

93,257

37%

510,300

153,799

510,300

152,380

612,350

164,710

Office of Tax Analysis

 

November 15, 2018

A2 Eligibility Rules

A2 (continued)

Notes for A2

Figure 1 Stylized Marginal and Average Tax Rates...

Figure 2 Stylized Marginal and Average Tax Rates and Tax Support...

Figure 2A - Moderate Income Focus...

Figure 3 Stylized Marginal and Average Tax Rates...

Figure 4 Stylized Marginal and Average Tax Rates...

Figure 5 Stylized Marginal and Average Tax Rates...

FOOTNOTES

1Deena Ackerman: Office of Tax Analysis, U.S. Department of the Treasury, Deena.Ackerman@treasury.gov.

2Michael Cooper: Office of Tax Analysis, U.S. Department of the Treasury, Michael.Cooper@treasury.gov.

1This paper focuses exclusively on federal income tax benefits. Although state tax systems also offer support to families, the benefits from state provisions, including any interaction with federal benefits is not discussed.

2The title of the law is “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018.”

3Technically, the value of the exemption is set to zero through 2025. The definitions used for determining whether a child or other dependent member of the household qualifies for key benefits remain in place.

4Throughout this paper, taxpayers are considered to benefit from a provision (or set of provisions) if they pay at least five dollars less in taxes than they would have paid in absence of the provision (or set of provisions). Tax Year 2020 estimates (which would be consistent with the first year of the budget window) are available upon request.

5To qualify as a dependent relative (or other individual), an individual must reside with the taxpayer and have income below $4,250 (which would have been the dependent exemption amount in 2019 had it not been set to $0 by the TCJA).

6In certain cases, a married taxpayer with children may be considered unmarried for tax purposes. The taxpayer must live apart from his or her spouse for the last six months of the year, maintain the household where the children reside for more than half the year, and be able to claim the children as dependents.

7See Appendix Table A1 for a summary of the rate brackets.

8In this analysis, the filing status of head of household filers is eliminated; tax liability is recalculated for all current head of household filers using the parameters for single filers.

9At incomes in excess of $100,000 the average benefit begins to decrease. Although all head of household filers may benefit from the wider brackets (see fn. 4), only those who take the standard deduction also benefit from the larger standard deduction. The higher AGI groups have progressively fewer taxpayers who take the standard deduction, and thus a smaller share of returns within group benefiting from both the effect of the wider brackets and the increased standard deduction.

10One reason low income single-parent families may not benefit from the head of household status is the presence of relatively large amounts of non-refundable credits. For example, suppose a taxpayer has non-refundable credits totaling $2,000 and has no refundable credits. Suppose also that the taxpayer has tax liability before credits of $1,500 if the taxpayer files as a single and $800 if the taxpayer files as a head of household. In both cases, the taxpayer's liability after non-refundable credits have been applied is $0.

11There was no increase in this parameter for 2019.

12Low-income taxpayers will not receive the full benefit from the CTC and ACTC. For example, taxpayers with 1 child must have gross income of at least $11,833 to receive the full $1,400 of ACTC. To receive the full $2,000, a taxpayer must have gross income of at least $30,395 if filing a joint return or $24,345 if filing as a head of household. If the family also has child and dependent care expenses, the minimum incomes necessary to receive the full $2,000 child credit would be about $37,395 if filing a joint return and $32,345 if filing as a head of household.

13There are four different EITC schedules, for those with zero, one, two, and three or more qualifying children.

14Married taxpayers must file jointly in order to claim the EITC; married couples filing separately are not eligible for this credit.

15A full-time student is an individual who, during each of five calendar months during the year, was a full-time student at an educational organization broadly defined, or in certain farm-related programs. Full-time is defined by each educational organization. In general, it corresponds to at least 12 credit hours or their equivalent.

16Special rules apply to allow married couples to claim the credit if the spouse is a full-time student.

17Table 4 includes a small number of families who have expenses for the care of disabled dependents other than their young children.

18A second child and dependent care benefit is available to families whose employer offers a Section 125 flexible spending account (FSA). Participating taxpayers may exclude from income (for both income and payroll tax purposes) up to $5,000 of eligible expenses per return paid through the account. In 2019, an estimated 1.5 million families excluded $5.4 billion from income through a dependent care FSA.

19In years prior to 2018, taxpayers may also have chosen to claim a tuition deduction instead of a tuition credit. Because this benefit has expired, it is not included in the analysis.

20Table 5 includes families with qualifying education expenses for themselves as well as for their children.

21The AOTC is partially refundable. Table 5C estimates the number of families that would be affected if the entire AOTC were converted into a non-refundable credit. Families with sufficient tax liability to claim the full credit would not be affected.

22No taxpayer eligible for both should prefer the LLTC to the AOTC.

23The benefit of head of household status and the exclusion for child and dependent care are not considered in Tables 6 through 8.

24The number of credits claimed and the amount claimed shown in Table 8 also differ from the number of families benefiting shown in Tables 1 through 7 because the latter do not include dependent filers and ignore changes in tax of less than $5.

25To reflect the $10,000 cap on state and local tax deductions under TCJA, the previous Treasury assumption of 18% has been decreased to 15%.

26Stylized marginal tax rates are calculated based on thousand dollar earnings increments, except in Figure 1 which (without loss of comparability) uses hundred dollar increments in order to conform to the lower income scale on the horizontal axis.

27For taxpayers who claim the standard deduction, taxable income increases by the $1,000 increase in wages. The second assumption implies that, for taxpayers who itemize their deductions, taxable income increases by $850 — the $1,000 increase in wages less 15%, or $150, for the commensurate increase in itemizable expenses. This implies that once a taxpayer begins to itemize deductions (and ignoring phase-outs of any credits), the stylized marginal tax rate is equal to the statutory marginal rate reduced by 15%.

28The tax support for a child due to the EITC is the value of the EITC for a family with one child less the value of the EITC to that family in absence of that child. This effect is most visible at the lowest income, where the EITC for workers without children is also phasing in.

END FOOTNOTES

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