Families Use of Child Tax Credits to Overcome Barriers

Many families are still waiting on Congress to decide if it will expand the child tax credit as part of the Tax Relief for American Families and Workers Act of 2024.

Financial educators say the tax credit could result in a significant tax refund or tax deduction of nearly $2,000 for each child.

Knowing how to leverage the funds could help families overcome barriers and move toward economic security, said Joyce James, founder of the Middleburg Institute.

Since October, the nonprofit organization has coordinated child tax credit awareness workshops that included training on advocacy, financial literacy, mental health and leadership. One objective of the campaign was to help residents realize the economic impact and benefits of tax credit policies as they are expanded in Louisiana, said James.

"When people receive a tax refund, it can be used to put themselves in a better financial position," said Garrett Ganucheau, vice president of business development at EFCU Financial.

EFCU Financial provided financial education workshops for participants of the Middleburg Institute’s child tax credit awareness campaign in Dutchtown and Baton Rouge. These workshops focused on overcoming barriers to savings, budgeting, and building a savings plan.

How can tax refunds be used to provide financial security?

"Paying off debt is a key to financial freedom," said Ganucheau. "It can improve the person’s credit score." He added that using tax refunds to help restore credit can be an important part of improving financial health for many people. After paying off debt or paying outstanding bills, he suggests residents have a plan to rebuild credit.

"One strategy that can be helpful is to get a share-secured loan and a share-secured credit card. It is easy to take a portion of a person’s tax refund and use it to open both products. Opening them and using them properly can result in a positive impact on credit scores,” Ganucheau said.

He also advised participants at the workshop to start saving.Ganucheau also mentioned high-yield savings accounts and share certificates (or certificates of deposit) which can be an important part of a savings plan. "They offer higher dividend rates than standard savings products, which means the person’s money is growing and getting them closer to their financial goals. Whether that goal is a down payment for a home, emergency savings, a vacation, or setting money aside for their children’s education and future, high-yield savings products can be a great vehicle to get them to their destination," he said.

The U.S. House of Representatives passed the Tax Act, which is being contested in the Senate. As it stands now, working taxpayers—who earn up to $400,000 as joint filers or $200,000 as single filers—would receive a tax credit, or deduction, from the taxes they would otherwise owe, explained David Lindenfeld of the Together Baton Rouge Tax Fairness Team. The maximum credit under current law is $2,000 for each child under age 17. For a family with two children, the credit could be as much as $4,000. Taxpayers are advised not to wait for the new bill to pass, but to file according to these 2023 provisions, he said.