Single Parents Can Receive Up to $9,000 in Tax Subsidies

The Tax Code provides substantial benefits for families with children, including up to $9,000 for a single parent with two children, according to a new study.

Tax breaks for families range from credits targeted towards low-income families to deductions that favor higher-income families. Some provisions benefit a family simply because they have children, while others try to incentivize specific behavior such as going to work or attending school.

A paper, "A Reference Manual for Child Tax Benefits," by Elaine Maag, Stephanie Rennane, and Eugene Steuerle for the Tax Policy Center at the Urban Institute and the Brookings Institution, describes the various child-related provisions and shows the distribution of who benefits from the provisions.

The rules governing the various provisions are complex and ripe for reform, the authors noted.

“Though sometimes considered universal, few child tax benefits truly extend to all children,” they wrote. “What is more, confusion abounds. Low-, middle-, and high-income families qualify for different benefits. While some benefits are awarded equally per child, others decline in value for each successive child, and some are available only for a limited number of children in each family. In fact, although low-income families receive higher subsidies than higher-income families for their first and second children, the inverse is true for the third and fourth children Some child-related activities (including child care and college attendance) receive specific subsidies, while others (such as after-school activities) do not.”

To further complicate matters, the definition of a child is inconsistent across various tax subsidies, they noted. The rules vary by age, residency, citizenship status, and whether the taxpayer provides support for the child. Many Tax Code provisions were enacted piecemeal, with different budget constraints contributing to the varying qualifications for eligibility.

The paper describes the current child-related tax provisions and some of the scheduled changes, along with different proposals from legislators and academics for reforming various child-related provisions. However, the authors noted that the federal government is currently spending over 50 percent more than it is collecting in taxes, leading to budget pressures on all areas of spending and taxes, leaving the future of the entire Tax Code highly uncertain.