The Earned Income Tax Credit, Family Complexity, and Children’s Living Arrangements

Abstract

parents and their partners, children are also increasingly likely to live with other extended family members (Pilkauskas and Cross 2018). In 2018, more than 15 percent of children lived with adults who were not their parents or their parent's partners (Harvey, Dunifon, and Pilkauskas 2021). Complexity in children's living arrangements is also closely linked with socioeconomic status and race-ethnicity: children from low-income and non-White households experience greater complexity than their more affluent peers (Harvey, Dunifon, and PilkauskasThe Earned Income Tax Credit, Family Complexity, and Children's Living Arrangements k ather ine m. michelmor e a nd natash a v. pilk ausk as Demographic shifts over the last half-century have resulted in dramatic changes in family structure. These changes have implications for the social safety net because public assistance programs define families differently. This article focuses on a critical poverty-alleviation policy, the Earned Income Tax Credit (EITC), to document family complexity in the United States. We find that more than 60 percent of children in lowerincome families reside in households with ambiguity in tax filing and thus in claiming valuable credits. Tax filing ambiguity driven by family complexity is especially common among households with Black children, highlighting significant racial inequities in the tax treatment of complex families. We also consider two reforms to reflect the realities of families today: the childless EITC and a noncustodial parent EITC.

The Effects of Income on the Economic Wellbeing of Families with Low Incomes: Evidence from the 2021 Expanded Child Tax Credit

“…For instance, if a child was living in a different tax filing unit in 2021 than in 2020, the payments would have gone to the 2020 unit unless the family filed this change on the IRS online portal. Nearly 60% of households with low incomes face ambiguity in tax filing for the EITC due to family complexity (such as custody or residency issues), challenges that families claiming the CTC also face (Michelmore and Pilkauskas, 2022), suggesting that this issue could be widespread.…”