The value of the credit has increased to $2,000 for the 2018 tax year, and the income thresholds at which it phases out have risen tremendously. Effective 2018, the income thresholds for eligibility have increased to:
- $200,000 for single tax filers.
- $400,000 for married couples filing jointly.
This is FANTASTIC news because in the past, the Child Tax Credit was only $1,000, and was only given to those who earned at most $75,000 as an individual and $110,000 as a married couple. For every $1,000 you make over these two income thresholds, the credit gets reduced by $50. In other words, in the past, if you make $130,000 as a married couple or $95,000 as a single person, you no longer get any of the $1,000 tax credit!
Understanding The Child Tax Credit
Let’s discuss with the government was so discriminatory before 2018. What does it mean when only married couples making $110,000 or less, or singles earning $75,000 or less can get a full $1,000 tax credit? Logic would dictate the following three reasons:
1) The government only favors middle-to-low income couples who have kids.
Given that the majority of married couples in America make less than $110,000, the government is not as discriminatory as one may think. However, does being less discriminatory mean that you are not discriminatory? Hell no. Let’s say you are an Asian American restaurateur who welcomes every single ethnicity into your restaurant except for Caucasian Germans because they remind you of World War II. You are still a damn racist. The government practices socio-economic discrimination which is wrong. Please understand this, even if you may be a beneficiary.
2) The government only wants middle-to-low income people to have kids.
If the government wanted to help people of all income levels, they would extend the tax credit to all people. For some reason, $110,000 is the income maximum which is befuddling. People do realize $110,000 goes a lot farther in Austin than it does in New York City right? What happens when only middle-to-low income people have kids? We create a very non-diverse society that contains even less higher income children.
What happens if you are of very low income, say $15-$25,000 a year and see a government incentive of $1,000 per child dangling in front of you? If you a normal, horny, short-term focused person, you will likely at least consider having several kids. If you have five kids, you get $5,000, which is 20-33% of your entire annual income of $15-25,000! You’ll have a nice family, look for more ways to take advantage of the government, and probably think about NOT spending the entire $5,000 on your five kids, but skimming a lot of it for your own use. Can you see the cycle of poverty forming yet?
3) Because kids are expensive, the government wants to help families lessen their cost burden.
If kids are expensive, and you are barely making enough to live a comfortable life and save for your retirement, having a kid, let alone several kids is probably not a good idea. Yet, the government provides mixed messages to the American people by saying we will help you with your child expense, in order for you to have more kids! The world has over 140 million orphans, yet we are encouraging more people to have kids with a $1,000 tax credit?
Let’s Get Busy Baby!
There’s no doubt in my mind having a family is a beautiful thing, provided your kids are not duds. It’s inherent for many of us to want to have children of our own despite overpopulation being the #1 reason for the destruction of our planet. It’s our free right to populate the Earth however we please. I just seriously think the government needs to stay out of our personal lives and stop sending wrong signals to the American people. Leave us alone, and let us discover the world for ourselves!
Eradicate the $1,000 tax credit which is discriminatory to the millions of American families who make over $110,000 a year. Instead, raise the adoption credit from $13,360 to $14,360 and encourage more people to think about adoption as a compliment or substitute to raising a family. At least we will be helping five things at the margin: a child in need, a lower income family from detonating their finances, a person or couple whose dream it is to start a family via adoption, taxpayers from having to pay more taxes to fund the irresponsible, and our country’s balance sheet!
Related: The Best Age Range To Have A Baby: A Biological And Economic Analysis
If you don’t earn enough money that you rely on government “incentives”, why do you keep having them? I can understand 1 or 2 kids, but when you have two kids and you’re complaining that you need tax credits, maybe you shouldn’t have a third. By the same token, why in the heck do I have to support people with 5 kids in my real estate taxes. 60-65% of my real estate taxes goes to support schools. If you have more than two kids, you should pony up more and support your own kids.
Emily B says
Interestingly, we find ourselves unable to access the $2000 child tax credit even though we have a son. We adopted him last January when he was just a few days old but he was not issued a SSN. We applied for an ATIN to get the child tax credit since his adoption has not finalized. Full CTC amount of $2000 is not issued to us because he has an ATIN instead of a SSN. Instead, we get $500. So, the government is actually discouraging adoption. I find it fascinating that we pay through the nose to adopt but our child doesn’t count as a full child to the government. As an aside, I do know states that issue SSN to newborns even when they’re adopted but our son’s state does not.
Why do people that put the largest burden on the system get a financial tax break. That is not a sustainable financial model. Stop giving incentives to have kids. This country is drowning under it’s own weight. Plus, I don’t want to pay for your f%^k trphies.
Very interesting article – I agree!
You could make this argument for a lot (maybe all) tax credits/incentives out there and you could make a separate but probably equally valid argument to do away with tax brackets and move to a flat income tax. Here’s the kicker: then we’re destroying jobs and no politician could ever stand for that! Don’t you see that the government’s function is as a job CREATOR (*sarcasm*)?
If taxes were as simple as take how much I made, multiply by .15, write check, send to government then anyone who has passed the sixth grade could do their own taxes! Entire companies (TurboTax, HR Block, etc) would cease to exist (and by the way would pour SOOO much money into lobbying against this). Corporations could suddenly eliminate their entire tax department. Tax accountants? Buh bye! And what about the nearly 100k people who work for the IRS? Well we probably won’t need most of them anymore either.
Get your billions back America!
For additional interesting facts about the IRS: https://www.fool.com/investing/general/2014/02/08/10-incredible-facts-you-probably-didnt-know-about.aspx
I belive this is is place to help people like my family. I work 60 hours a week have 2 children with a third on the way. My wife stays at home to raise our children because we don’t want someone else doing our job. I make 28,000 per year and that is before taxes. People sit here and complain that they dont get a 1000 dollar credit on their taxes per child a year. Boo Hoo…… I could only wish I made 125,000 a year so I didn’t qualify. I bust my ass every day just to put a roof over my childrens head and food on the table. No help from the Federal goverment and no help from the state goverment. So yes I do look forward to every tax credit that is avalible to me. I wish some of the people complaining about this would have to walk a year in my shoes and stay upbeat and positive about everything in life. And no I am not some hillbilly in BFE. I am a college Educated man. Life has given me lemons all along the way and the only think to do at that point is make lemonade…Thank You and God Bless
Gwen Bell says
The sky rocketing national debt began with the eitc and is never going to be under control until the eitc is demolished and the welfare system is given back to the welfare department. The IRS has put the burden of audit upon the preparer and it is a night mare gone bizzerk!! How are we to know who is lying about what kid and who is in the house with the tax payer and the child. The only way to know for sure is to “case the home” and see who is there and who is not. I am tierd and the penalties are astronomical for the filing of a person/s that do not deserve the eitc. When this credit is gone Then the night mare will be over… when everything settles down and the irs has to look for who is not filing once again (not who is filing with false income just to get the eitc) then we will be back to normal with the IRS doing their own auditing.
I know this article is old, but I agree! My husband and I make enough to get no child tax credit at all!! We have 2 children and a 3rd on the way. I will be out on disability soon for the pregnancy and we are getting less than 1/2 my pay b/c of the NJ State disability “max” which causes us to lose over 1200 a month! Even that is not set for normal working people..2/3 of pay is a loss in its on but not as bad as less than half..Once again, if you work your but off to support your family and make sure your children are comfortable you get screwed..who can live off of half an income!!! They are penalizing everyone who works and makes a decent living!! We don’t live beyond our means either!! We have a normal priced house, we drive Mazdas! My husband, served our country to be where he is today, and make sure his family is taken care of..he now still risks his life everyday and works alot of overtime so we can afford the extras like sports, vacation etc. We are saving for retirement but b/c we are maxed out on everything, rising food prices, gas prices… we have a hard time saving for their college!!! We pay so much in taxes to help others but just becuase we max out doesn’t make us rich..he works alot of overtime for us to afford extras!!! It is not fair..if they want to give credits they should make it for all the working class people..we are the ones that deserve a break! We pay all of our taxes…and then some, we pay our medical..we get no help from the government!! I don’t mind helping those in need especially families who lost jobs etc..but what I do mind is helping all those people who don’t want to help themselves and just keep having children and can’t afford them…
Financial Samurai says
Welcome to my site. I think you will enjoy reading many of the posts under the BIG GOVERNMENT category on the right!
Good luck with number #3.
The phase out levels were set in 1997 and were never indexed for inflation. If you are middle income and defer a lot to retirement, like we do, these should not affect you. One year, we had a partial phase out, $50, because my wife and I, despite our best efforts, could not get below the threshold. These efforts included: Maxing out both our 401k’s: $30,000 or so, Maxing out the wife’s health savings account, also pre tax: $6000, making contributions to our health and dental and vision insurance, about $1500 for the entire family. After all these, our income was too high to contribute to a tax deductible IRA, so we had a small $50 phase out. Though I felt I had done all I legally could to avoid it so I was fine with it. We made Roth IRA contributions that year instead, but that was before I started reading the financial Samurai and now I am beginning to question the logic of these contributions. My wife stays at home with our two kids, so I think we will be doing deductible IRA contributions this year (due to one income instead of two) instead of any Roth contributions.
Last year I messed up and we both did Roth contributions, but then again, that is before I started reading the Samurai.
Financial Samurai says
It’s too bad not more things are indexed for cost of living or inflation. AMT is the best example where millions of folks are negatively affected unintentionally. It’s strange the gov’t doesn’t have the might to fix this. But, we know why. It’s b/c tax laws and money = POWER. The more freedom the gov’t gives to its citizens, and the more money they let us keep, the more powerful we become at their expense.
ROTH contributions is not the worst thing in the world. It just feeds the beast to do horrible things, with no promises of giving your money back when it’s time that’s all.
I had to work two jobs last year just to keep my head above water. Then come tax season, they want me to pay in more money to the system. This has been happening for the past few years. I’ m tired of listening to people get free cars, tvs, and other things just from the child tax credit. I have to bust my butt, just to watch other people profit. People keep saying its to help families with their cost, but all i see is more people blowing more money. Its not fair that people can profit off of having kids. Especially, in most cases, its their personal cholice to have kids. I dont get money for my choices. The people who say its not the kids fault, are speaking the truth. But, in reality, its not the kids who are benefiting from the tax credit, its the parents. We are creating a system of dependent people and the cycle will keep going, until someone stops it. I once had someone say that children will pay taxes one day. And I thought about that, and then realized that is not true either. You cant promise that they wont do the same things their parents did, or even prove that they wont end up in jail, which will cost us more money. I know my views are not common or liked, because most people are getting this money. But, if people dont start looking at the bottom line and look at their neighbors and see what it is doing to them; we will be driving the people like me into the ground, to never be able to get back up. I’m not saying that we should get rid of it, but I dont believe in giving so much. Someone has to pay for the money that the government is giving out like candy, and its people like me that are. I dont want to have to pay for things that someone else made the choice to do. People should pay for their own choices.
Thank you for your time.
the government should tax everbody the same and give the same credits no matter if they have chidren or not most lower income families can get enough government assistance as it is and yes i do think if you cant afford them dont have them, yeh oce is an accident the rest are not
Well not all people that get the tax credit ask for a hand out me and my husband make 30,000 a year. We never get an assistants from the government. but the tax credit is nice to put in my daughters savings account for college
Roxanne Rocha says
If my husband and I made more than 110,00 together annually I would care less if I get or don’t get 1,000 dollars for each kid I have. When you have a family who lives humbly that doesn’t matter. You learn to make it with what you have and the 1,000 dollars that the government gives is nice but it’s not the reason we decide to have kids or not.
Financial Samurai says
The question though is, how do you know? It’s easy to say you wouldn’t mind not getting the $1,000 tax credit when you are getting it. For those who aren’t allowed, they feel discriminated against. Their cost of living to earn that salary is much higher.
Sam, this is a response to your response above: “More and more, I believe becoming wealthy is a choice.”
I believe many people become wealthy due to hard work. I believe just as many (if not more) were born into a situation where they can never become wealthy – or the chance of it is so slim it’s almost negligible. And I absolutely believe some people can never become wealthy. I also believe that a lot of people are lazy and will never become wealthy.
A very wealthy family friend’s son was born a paraplegic and requires round the clock nursing care. He was educated by the best schools, has a supportive family (his medical expenses from the nurses alone are over $10,000 a month, which his parents pay for) and a solid support system. Do I think he’ll ever be wealthy, despite growing up very rich? Nope, not unless he gets an inheritance. He was born paralyzed from the neck down, despite his perfectly functional brain. This man got screwed by the genetic lottery. There’s only one Stephen Hawking in the world.
Similarly, those born with other defects or disabilities never have the chance to become wealthy, save through inheritance or the generosity of others. I went to high school with a girl that was severely dyslexic. She had wealthy parents and a very good upbringing. Amazing person, kind-hearted, very sweet. However, she was terrible at school, because her learning disability was so profound. She tried HARD – she studied more than anyone else I knew. Her grades were terrible and she had an extremely difficult time. It took her many years (I think close to 10) to plod through a 2 year associates degree after high school. She has a low paying job now, but it’s full time, and she’s grateful. She is a dear friend, who can communicate effectively verbally. Her dyslexia prevents her from having basically all office/writing/desk/etc jobs – anything that requires written communication. Again, this woman was screwed by the genetic lottery.
These are two examples from my personal life – people from good (both wealthy and both doted on their children and helped them with their educations) families, who were given every possible help from their support systems. I know of many more in my life. It’s not hard to extrapolate from there.
A lot of people raised in poor situations don’t know there is more to aspire to, or that they have the capacity to work hard and find success. A lot of people raised in poor situations receive sub-par education and no support at home. They have impoverished, absent (often working) or disinterested parents. Few even graduate from high school. The path they must take to become wealthy is MUCH more difficult than most ever face. Do more than a few of those kids really have a chance to get out of poverty? Realistically, I don’t think so. Which is why I have no problem being taxed at a high rate (due to my personal wealth) to help support these people.
However, finding a solution (for people raised in bad situations) to prevent this from happening in the first place would be a much better plan. But I haven’t seen any feasible solutions so far.
I don’t think people should have kids they don’t want or can’t afford, but I can’t think of any ethical way to prevent it from happening. Suitability tests before being able to have a child? I don’t want the government in my personal life. Maybe a financial audit to prove you can support the kid? A good idea, but where do you set the bar?
Being denied welfare unless you’re on birth control (such as depo provera, which is given as a shot in the arm every 3 months – NOT something like the pill, which is daily and you can’t monitor) is the best one I’ve thought of so far, but that puts the burden solely on women which isn’t fair.
We live in a society where we do not let the dying lay in the streets, we give them medical care. A CIVILIZED society. And giving birth to a child you cannot afford (that you intend to keep) is effectively telling this society you expect them to pay your child’s way, because you wanted one. And that’s BS, in my opinion.