Working-Family Tax Credits Help Over 1 Million Military Families
Credits Keep More Than 140,000 Veteran and Active-Duty Families Out of Poverty

PDF of this report (3pp.)

By Arloc Sherman

July 2, 2013

About one in four current or former armed forces families with children, or 1.5 million military families, receive either the Earned Income Tax Credit (EITC) or the low-income component of the Child Tax Credit (CTC), two tax credits for low- and moderate-income working families, according to an analysis of Census and IRS data.  In about 280,000 of these families, a parent is currently serving in the armed forces; in the rest, a parent is a veteran. 

The 1.5 million families contain about 3 million children under age 18 and received, on average, about $1,000 per household from the low-income portion of the Child Tax Credit in 2011 and $2,650 from the EITC.  Studies have found that children whose families receive more income support from the EITC tend to do better in school and are more likely to attend college and to earn more as adults.[1]

Table 1 provides state-by-state estimates.  The number of military families receiving the credits ranges from roughly 3,000 in Wyoming, Rhode Island, and Vermont to more than 100,000 in Texas, California, and Florida.  In five states (Alaska, Hawaii, Montana, Virginia, and Wyoming), military families made up more than 10 percent of families with children receiving either the EITC or the low-income component of the CTC.  Military families make up 6.1 percent of the families receiving these tax credits nationwide.

In 2013, a married couple with two children may qualify for the EITC if it makes less than about $48,400; it may qualify for the low-income portion of the CTC if it makes less than about $47,000.  The income thresholds are lower for smaller families.  For many active duty and veteran families, these credits make a major difference to their economic security: 

  • The EITC and CTC together keep more than 140,000 military families — with nearly 300,000 children and 600,000 total family members — from falling below the poverty line, based on the federal government’s Supplemental Poverty Measure (SPM). [2]   (The SPM, unlike the official poverty measure, counts tax credits as income.)
  • These credits reduce the severity of poverty for about another 800,000 members of military families.

These figures come from a Center analysis of IRS and Census Bureau data.  IRS data show that, in total, about 25 million families with children received either the EITC or the low-income portion of the CTC in 2010.[3]   Census data for 2009, 2010, and 2011 indicate that, nationally, 6.1 percent of such families have a parent who is a military veteran or on active duty.[4]   (Multiplying the 25 million total from IRS data by this percentage yields the number of military families assisted.[5] )

Table 1
Estimated Number of Veteran and Armed Forces Families with Children
That Receive the EITC or Low-income Component of the Child Tax Credit
U.S. Total 1,510,000
Alabama 38,000
Alaska 6,000
Arizona 32,000
Arkansas 24,000
California 110,000
Colorado 24,000
Connecticut 6,000
Delaware 5,000
Florida 104,000
Georgia 80,000
Hawaii 13,000
Idaho 11,000
Illinois 43,000
Indiana 34,000
Iowa 12,000
Kansas 16,000
Kentucky 28,000
Louisiana 33,000
Maine 7,000
Maryland 24,000
Massachusetts 12,000
Michigan 40,000
Minnesota 15,000
Mississippi 25,000
Missouri 37,000
Montana 7,000
Nebraska 9,000
Nevada 14,000
New Hampshire 5,000
New Jersey 17,000
New Mexico 14,000
New York 51,000
North Carolina 79,000
North Dakota 3,000
Ohio 55,000
Oklahoma 28,000
Oregon 17,000
Pennsylvania 48,000
Rhode Island 3,000
South Carolina 42,000
South Dakota 5,000
Tennessee 45,000
Texas 138,000
Utah 13,000
Vermont 3,000
Virginia 56,000
Washington 37,000
West Virginia 11,000
Wisconsin 22,000
Wyoming 4,000
Source: CBPP analysis of IRS data (including state data on the overlap between the Earned Income Tax Credit and Child Tax Credit compiled by the Brookings Metropolitan Policy Program) on the total number of EITC and Child Tax Credit tax filers with children in tax year 2010; and CBPP analysis of Census Bureau data to determine the share of such tax filers in each state that were military families.  The Census figures use three years of data from the American Community Survey (2009 to 2011) to improve reliability.

End notes:

[1] Chuck Marr, Jimmy Charite, and Chye-Ching Huang, “Earned Income Tax Credit Promotes Work, Encourages Children’s Success at School, Research Finds,” Center on Budget and Policy Priorities, revised April 9, 2013, www.cbpp.org/files/6-26-12tax.pdf.

[2] The SPM poverty line for a couple with two children renting a home in an average-cost community was $25,222 in 2011.  The poverty reduction figures cited here include the entire CTC, both its low-income (that is, refundable) and non-refundable portions.  Refundable credits like the EITC and the low-income portion of the CTC help families whose incomes are so low that they owe little or no federal income tax.

[3] Published IRS figures show that 20.7 million tax filers with one or more qualifying children claimed the EITC in tax year 2010.  In addition, according to unpublished IRS data compiled by the Brookings Institution’s Metropolitan Policy Program, approximately another 3.9 million tax filers claimed the low-income (refundable) portion of the CTC in 2010, not counting those who also claimed the EITC, for a total of about 24.6 million families with children who claimed either credit.

[4] The 6.1 percent estimate is from a Center on Budget and Policy Priorities analysis of the latest three years of data (for 2009, 2010, and 2011) from the Census Bureau’s Current Population Survey (CPS).  We use three years of data to improve the reliability of the estimates.  Data on taxes and tax credits in the CPS are estimates that the Census Bureau calculates based on income and other information provided by CPS respondents.

For the state figures in the table, we follow a similar procedure but estimate percentages of military families using the Census Bureau’s American Community Survey (ACS), rather than the CPS, because the ACS is larger and more reliable at the state level.  We again use three years of ACS data (for 2009, 2010, and 2011) to increase the reliability of the state estimates.  Because the Census Bureau does not provide tax estimates for the ACS, we have calculated families’ taxes and tax credits.  (We assume all of these tax filers claim the standard deduction.)  As in the CPS, the ACS calculations show that, nationwide, 6.1 percent of EITC and low-income CTC filers with children are military families.  The percentage ranges by state from 3.1 percent in New Jersey to 15.1 percent in Alaska.

[5] The Census data undercount the total number of families receiving the EITC and CTC.  For this reason, we start with the actual number of families receiving the credit in IRS records and use Census data to estimate the portion of the participating families that are military families.  If we used only the Census data, the results would be similar but a bit lower:

In some respects, our estimates are low.  They leave out some military families that we could not reliably identify from the Census data, such as families with a member of the armed forces who is serving overseas or stationed in barracks — and therefore is not covered in the survey.  Moreover, because we focus on parents, we do not count families receiving the EITC or CTC that contain current or former service members who are dependent children living at home, such as a recently discharged veteran with a service-related disability.

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