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The Future of the Child Tax Credit in Puerto Rico

Until tax year 2021, the Child Tax Credit received by most parents in all the States was not available to most families in Puerto Rico. In a territory which has the lowest birth rate of any jurisdiction in the United States (1.04 births per woman; Vermont, the lowest state, is at 1.6), families were eligible for the CTC only if they had three children. The result was that almost no families in Puerto Rico received the tax credit.

The American Rescue Plan (ARP) permanently extended the state benefits to Puerto Rico. The ARP also temporarily increased the credit from $2,000 to $3,600 per child for kids under age six. It did one more thing: it removed the minimum income requirement.

Prior to this change, parents earning less than $2,500 per year were not eligible for the credit. The Build Back Better plan extends the credit for parents without the minimum income requirement, but Congress has yet to pass the plan.

The poorest children

If things remain as they are, some families in Puerto Rico would not receive the Child Tax Credit even if the territory continues to be eligible due to the fact the average annual earnings in Puerto Rico are lower than in the states.

The median annual income in Puerto Rico is $20,474 and more than 20% of residents earn less than $10,000 per year. 57% of the children live in poverty. (Figures from the U.S. Census Bureau.) The unemployment rate is 7.1%, a significant improvement over the recent past but still nearly double that of the United States as a whole.

While this data does not show the number of families who would be ineligible for the CTC if the minimum income requirement is reinstated, it is clear that due to the territory’s economic situation, the number would be greater than in the States.

Hawaii and Puerto Rico: Different Paths, Different Economies


Why is there a minimum income requirement?

Apparently, there are Members of Congress who fear that allowing the Child Tax Credit to be fully refundable (available to people who owe no income taxes at all) would discourage parents from working.

Some representatives, including Joe Manchin (D-WV) and Mitt Romney (R-UT), would like to see a work requirement attached to the credit.

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