Child Benefits in the U.S. Federal Income Tax

Abstract

This paper examines changes in, and interactions between, the major components of the U.S. federal tax code that provide substantial child benefits, including stimulus payments that depend on children. The focus is on creating a measure of total child tax benefit by income level, tax filing status, number of children, and year. From this measure, we learn that child tax benefits have more than doubled in real terms since the early 1990s and that low-income families receive larger child tax benefits than high income families for a first or second child, while the reverse is true for a third or fourth child. This paper also provides a case study of a tax policy change that lacked the intended consequences due to interactions between the child-benefit components of the tax code. Finally, this paper considers a comparison of child tax benefits to estimates of the cost of raising children.