Note: These plots show binned scatterplots: a graphical representation that groups data points into bins based on a variable and plots the average value of another variable within each bin to identify trends or relationships of the fraction of U.S. children claimed on a 2018 tax return, by the racial or ethnic makeup of the child’s neighborhood. The solid line represents the best linear fit.
Providing financial assistance to low-income families with children is a central policy goal. In the United States, much of this support is delivered through the tax system, requiring families to file tax returns to access child-related programs. Filing requirements often pose barriers, however, with approximately 20% of eligible households failing to claim the Earned Income Tax Credit: a refundable tax credit aimed at supporting low- to moderate-income working individuals and families by reducing their tax burden and providing additional income (EITC), primarily due to non-filing.
This study examines how children are claimed on federal tax returns, using health insurance data to identify children and measure claim rates. The sample includes children reported as enrolled in health insurance for at least one month annually, representing 92-94% of U.S. children. The analysis spans tax years 2017-2021, capturing tax policy changes during that period. Key findings include:
- In recent years, most children in the U.S. have been claimed on tax returns, with 95-96% of children with health insurance reported on their parents’ returns. Using data on the fraction of the population without insurance, the authors estimate a lower bound of at least 88% for the child claim rate.
- Parents with very low wages, as well as those whose children receive health insurance through Medicaid or the Children’s Health Insurance Program (CHIP), are less likely to claim their children on tax returns. This is likely due to reduced incentives to file, as non-earners generally did not qualify for tax-administered benefits during most years in the study, and very low-income taxpayers were eligible for only modest benefits.
- Child claim rates are lower for children living in Black and Hispanic neighborhoods, potentially due to the smaller tax benefits these children are typically eligible to receive.
This research has important implications for designing safety-net programs. It indicates that tax-administered benefits are likely to reach most children without substantial additional cost. However, notable gaps exist for the lowest-income children and those in Black and Hispanic neighborhoods. Expanding eligibility to include traditionally excluded children could increase claim rates by providing stronger incentives for taxpayers to file returns. Without such behavioral changes, tax-administered safety net programs risk deepening existing socioeconomic inequalities.