How Illinois’ new child tax credit will affect suburban parents

Thousands of qualifying suburban parents could receive an income tax break next year due to the state’s first child tax credit included in the upcoming state budget.

Parents of children 12 and younger who also qualify for the state’s earned income tax credit are eligible for the tax break that could net as much as $300 for one child. Refunds would be higher for parents with multiple children in that age bracket, but the value is staggered similar to the EITC.

“It is an important step and it is really exciting because we have seen similar policies work at the federal level and in other states,” said state Rep. Mary Beth Canty, an Arlington Heights Democrat who helped champion child tax credit legislation in Springfield. “It can be the difference in families buying school supplies, diapers, new shoes or what have you. Those types of expenses that keep our families and kids on track for future success.”

According to state figures, 13% all personal income tax filers in Illinois received earned income tax credits in 2022, which reduces the tax burden for low- and moderate-income workers. To qualify for the new child tax credit, parents with at least one child 12 or younger would have to report less than $53,120 in annual earnings on their joint tax return. A single filer with one qualifying child would have to report less than $46,560 in annual earnings, according to Internal Revenue Service reports.

In 2022, Illinois Department of Revenue figures show 14% of the income tax returns filed in Cook County received earned income tax credits. Meanwhile, that figure was lower in the collar counties of DuPage, Kane, Lake, McHenry and Will.

In DuPage County, just 7% qualified for the benefit. It was 10% in Kane and Will counties, 9% in Lake County and 8% in McHenry County.

That means most suburban families in the collar counties won’t qualify for the child tax credit.

For the first year, $50 million has been earmarked by the state to provide the child tax credit refunds. The following years, the state will provide $100 million for the program, which will increase the value of the tax credit going forward, essentially doubling it.

The funding comes from increased tax rates on gambling, state officials said.

The Center for Tax and Budget Accountability, a Chicago-based nonpartisan government finance research group, has been advocating for a statewide child tax credit tied to the earned income tax credit since at least 2022.

“Its refundability feature also makes the CTC effective at making tax policy fairer, because like the EITC, the CTC functions to offset taxes other than income taxes — like sales, excise and property taxes — which place a disproportionate burden on lower-income earners,” according to the 2022 analysis.

In February, Gov. JB Pritzker proposed spending $12 million on a similar child tax credit for parents of children 3 and younger. But legislators advanced bills pushing for additional funding and widening the age range.

Dozens of social service agencies that long have been pushing the state to create the tax break also got involved to help secure the benefit in the state’s next fiscal year budget that begins in July.

“We saw the huge impact the federal child tax credit had here in Illinois during the pandemic,” said Erion Malasi, director of policy and advocacy at Economic Security Illinois, a nonprofit social service advocacy organization. “Right now, it’s not exactly the perfect thing for every single family in Illinois, but it’s a step in the right direction.”

Ultimately, social service agencies in Illinois like Malasi’s would prefer that parents of children younger than age 18 receive the tax break. However, Malasi said he believes legislators capped the age at 12 to provide a “meaningful” benefit to parents. Malasi said such tax breaks act as an economic stimulus.

“There’s been plenty of research on how the child tax credit is spent and its effect on the economy,” he said. “For every dollar refunded, $2.50 is spent.”

According to National Conference of State Legislatures records, Illinois joins 15 other states that provide a child tax credit of some kind to parents.

There are nearly 1.9 million children age 12 and younger in Illinois, according to the most recent population data available from federal sources. Cook County is home to nearly 40% of those kids, while nearly 26% live in the collar counties. The remaining 34.5% live in the other 96 downstate counties.

The budget was passed by the General Assembly last week and is awaiting the governor’s signature.

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