With Expanded Child Tax Credit Payments Starting Soon, Here’s Where the Most Families Will Benefit

The latest coronavirus relief package (known as the American Rescue Plan) enhances the child tax credit, providing $3,600 annually per child to families with kids younger than age six or $3,000 per child to families with kids between six and 17 as long as income requirements are met. The previous credit provided up to $2,000 per child but didn’t include advance monthly payments as now planned.

That being said, a married couple with a joint income above $150,000 and single earners who earn more than $75,000 won’t receive the full benefit. So the most recent LendingTree study looks at the 100 largest U.S. cities to see where the highest share of families will receive the full credit — and how much they’ll receive.

“These payments are a really big deal, and for millions of parents, they will be an absolute game changer,” says Matt Schulz, LendingTree chief credit analyst. “An extra $250 or $300 per month will help folks make ends meet more easily, allowing them to possibly pay down some lingering debts and in many cases keeping them from having to rely on things like credit card debt to get by. It’s a very significant thing.”

Key findings

• Midwestern families are expected to benefit the most from the expanded child tax credit. Four of the 10 cities with the highest proportion of families getting the full benefit are in the Midwest.
• Detroit has the highest share of families in line to receive the full benefits from the child tax credit. Researchers estimate that 95% of families with children in the Motor City earn less than the amount where benefits are reduced. Cleveland and Toledo, Ohio, rank second and third.
• Wealthier cities in California tend to have lower rates of families expected to get the full value of the child tax credit. Fremont, San Francisco, San Jose, Irvine and Santa Clarita all rank in the bottom 10.
• While Detroit has the highest share of families expected to get the full benefit, it’s not the city where families can expect the largest child tax credit. Researchers estimate that families in Washington, D.C., will get $10,924, on average, over a year.
• The tax credit will be beneficial in cities where housing costs are lower. Researchers estimate the average child tax credit in Detroit — $8,671 — would cover nearly 12 months’ worth of housing costs — highest among the cities in this study.

Where the most families will benefit from the new child tax credit payments

The IRS estimates that more than 36 million families (accounting for more than 66 million kids, according to the White House) will be eligible for the enhanced plan. Eligible families will begin receiving monthly payments on July 15.

The following 10 cities are where the highest proportion of families are expected to benefit from the expanded payments.

Income levels are impacting why more families in these cities are eligible for the full benefits. The median household income in the U.S. is $62,843. Compare that to the median household incomes in the 10 cities on this list:

• Detroit: $30,894
• Cleveland: $30,907
• Newark: $35,199
• Buffalo: $37,354
• Toledo: $37,752
• Brownsville: $38,588
• Milwaukee: $41,838
• Tucson: $43,425
• San Bernardino: $45,834
• Laredo: $47,593

Where the fewest families will benefit from the expanded payments

On the flip side, the following 10 cities are where the lowest percentage of families will benefit from the expanded child tax credit payments.

Income (mostly) helps tell the story here, too. As a reminder, the median household income in the U.S. is $62,843, and here’s what it is in the 10 cities highlighted:

• Fremont: $133,354
• Frisco: $127,055
• San Francisco: $112,449
• San Jose: $109,593
• Irvine: $105,126
• Santa Clarita: $99,666
• Plano: $95,602
• Seattle: $92,263
• Washington, D.C.: $86,420
• Atlanta: $59,948

Despite Atlanta having a low median household income of $59,948, that figure rises to $74,654 when you only consider households with children younger than 18, meaning more families here could be over the threshold for full benefits.

Schulz calls out two cities in Texas, where he lives. “Frisco and Plano are two of the wealthier cities in all of Texas,” Schulz says. “For many folks in those communities, that extra money amounts to a nice-to-have rather than a game changer.”

Where families can expect the largest child tax credit on average

Not all families will qualify for the same amount of child tax credit payments. Their household income amounts, how many children they have and their children’s age are all factors when determining monthly payment amounts.

The following cities in the U.S. are where families can expect to receive the largest child tax credit on average.

It’s worth noting that a city having a high average expected tax credit doesn’t necessarily mean many families will receive the full tax credit benefit.

Washington, D.C., is one of the cities where the fewest families will benefit, but those who will benefit will receive an average of $10,924. This is because D.C. households have an average of 1.03 kids younger than age six — top in the U.S. For comparison, the average across the 100 largest cities is 0.78.

Where families can expect the smallest tax credit

The following 10 cities are where families can expect to receive the smallest child tax credit on average.

While Greensboro, N.C. doesn’t have the smallest average number of children younger than 6 per family (that designation goes to Frisco, Texas), its average of 0.65 is below the average across the 100 largest cities of 0.78.

Expanded child tax credits would cover nearly a year of housing in Detroit, on average

The expanded child tax credit will be beneficial in cities where housing costs are lower. For example, researchers estimate the average child tax credit in Detroit ($8,671) would cover nearly 12 months’ worth of housing costs. (Remember that the average expected tax credits are based only on families receiving full benefits.)

When you compare Detroit (where child tax credits will go the furthest relative to housing costs) with Irvine, Calif. (where child tax credits would go the least far), it’s easy to see how these tax benefits will have varying effects on housing. In Detroit, median monthly housing costs ($729) are $1,750 less than in Irvine ($2,479).

Full details

3 ways parents can maximize their child tax credit payments

The families that do qualify for a monthly child tax credit payment may be unsure how best to utilize the money. Schulz breaks down a few options that families can pursue to make the most of this tax credit.

• Paying down high-interest debt. Putting these payments toward knocking down debt can have a huge impact. An extra few hundred dollars a month toward debt payments can dramatically reduce the interest you pay and your payoff time. “You can make those extra payments even more impactful by consolidating your debt payments into a single lower-rate loan,” Schulz says.
• Building your emergency fund. Even a small rainy day fund matters, and you should work to build it even as you’re paying down debt. “If you pay your card debt off in full without any savings, the next unexpected expense will just go right back on your card and the cycle of debt will just keep spinning,” Schulz says.
• Saving and investing. Once you have an emergency fund, save and invest toward another goal. Adding to retirement savings is always a good idea. A college fund or a deposit on a mortgage or car loan are worthy goals, too. Or maybe you’d like to take that vacation you’ve been putting off. Think about what you want, prioritize those goals and then put some of these payments toward them if possible.

Methodology

LendingTree researchers used data from the U.S. Census Bureau’s 2019 1-year American Community Survey to estimate where the most families in the 100 largest U.S. cities will benefit from the expanded child tax credit payments.

To estimate this, researchers found the number of families with children who met the requirements for earning the full benefits:

• Married couples who earn less than $150,000 a year
• Single parents who earn less than $75,000 a year

Researchers then found the percentage of families who met those requirements and compared those figures to the total number of families.

To estimate the tax credit’s value across the 100 cities, researchers found the average number of children younger than age six and between six and 17 for each household. Researchers then multiplied that number by $3,600 or $3,000 — depending on the correct amount — to estimate the average value of the tax credit for families receiving the full amount.