In 2023, Utah introduced its own child tax credit (CTC) marking a positive step forward. In 2024, the credit was slightly expanded. However, the credit's limited scope falls short of providing real assistance to families raising young children. Lawmakers should prioritize meaningful CTC expansion to better serve Utah families.
The current $1,000 child tax credit is for families with children ages 1-3 with an income of up to $54,000 for a couple or $43,000 for a family with a single parent (children age 4 will be eligible next year). Under the current child tax credit, 1.4% of families and 4.3% of children benefit. For those eligible, the average tax credit is $400.
Here's how expansion could impact families:
| Percent of Families Benefiting | Percent of Children Benefiting | Avg Tax Cut (per eligible household) |
|
|
Current Child Tax Credit |
1.4% | 4.3% | $400 |
| 2024 Expansion HB 153 expanded credit to 4-year-olds |
1.8% | 5.4% | $456 |
| 2025 Legislative Proposal HB 316 expands credit to newborns and 5-year-olds |
3% | 9.2% | $585 |
|
Meaningful Expansion |
7.2% | 21.7% | $1,297 |
Key Recommendations
The credit should be available to families with children from birth to 5 years (adding newborns, 4-year-olds, and 5-year-olds).
We support efforts in HB 316 to make all children ages 0-5 eligible. The first five years of a child's life are the most financially demanding for parents. Diapers, clothing, formula, and child care costs create a significant burden. Expanding the credit to all children aged 0-5 acknowledges the unique financial challenges families face during these crucial early years.
The credit should be refundable.
Utah's current CTC is non-refundable, meaning it can only reduce the amount of income taxes a family owes. Utah’s CTC doesn’t help families who don’t owe any state income taxes during tax season. Each family's tax liability varies each year. However, on average, a family with one adult and one child will not owe any income taxes until their annual income exceeds $37,000. Therefore, families earning less than this amount will not benefit from the credit. A refundable CTC ensures that low- and middle-income families—who pay sales and other taxes but have little or no income tax liability—can still benefit from the CTC. Because our current CTC is non-refundable, our analysis shows that currently, no families receive the full $1,000/per child benefit. 13 of the 16 states with a child tax credit have structured their CTCs to be refundable.
Support Real Financial Relief for Families
With the CTC’s current limitations, this tax credit is not functioning as a genuine support for families bearing the cost of raising young children. By making the credit refundable and extending eligibility to cover children ages 0-5, the state has the opportunity to create a more meaningful child tax credit that aligns with the financial realities faced by families.
While we support HB 316's limited expansion, we strongly recommend a more comprehensive, impactful approach. The CTC should be made refundable, ensuring that all families receive the full benefit of $1,000/per child. This expansion would create more substantial financial relief for families.
LEARN MORE ABOUT UTAH'S CHILD TAX CREDIT HERE
