Bigger New York Tax Refunds Expected for Thousands

New York Gov. Kathy Hochul and state lawmakers have agreed on an FY2024 New York budget that includes an expanded child tax credit. The state’s child tax credit will extend to children under 4 years old, which could eventually increase New York tax refunds by $330, or more, for some filers. The $229 billion bill passed early in May, over a month later than planned. 

What was important was "not a race to a deadline, but a race to the right results," Hochul said when announcing the agreement, adding, "I promised New Yorkers we'd make our state more affordable, more livable, and safer, and this budget delivers on that promise."

Expanded New York Child Tax Credit

New York already offered a child tax credit, but children under age 4 at the end of the tax year were excluded since were not considered a “qualifying child.” The new expanded credit will allow New York families with younger children to claim the refundable child tax credit.  

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What does an expanded tax credit have to do with your tax refund? Generally, a tax credit can reduce your tax liability, which sometimes results in a larger tax refund. When a tax credit is fully refundable, the amount of the credit can be refunded to you, even when you have a $0 tax liability.

Why an Expanded Child Tax Credit? 

The Center on Poverty and Social Policy reports that "near-cash benefits" like the expanded child tax credit can increase children’s future earnings, health, and education. The center estimates that expanding the child tax credit could decrease childhood poverty rates from 3.4% to 16.5%. 

The federal government previously expanded the child tax credit to lessen the financial impacts of the COVID-19 pandemic. Data show that the expanded federal child tax credit reduced childhood poverty rates nationwide. However, the expanded federal child credit is gone because it applied only to the 2021 tax year. The child credit for the 2022 tax year reverted to pre-pandemic levels.

And although lawmakers in Washington haven't been able to agree on what a new federal expanded child tax credit should look like, the popular tax break has gained traction in some states. 

What states are getting an expanded child tax credit? 

At least 17 other states have implemented or are considering new or expanded child tax credits. Other states already offer some form of child tax credit, but not all state child credits are fully refundable.  Here are some examples.

• California's current child tax credit applies only to children age 6 and under. A new proposal could change that, allowing many children to qualify for the credit until they turn 18. 
• Minnesota is considering a child tax credit of $1,000 per child under 6 years of age, up to $3,000 per family.
• New Jersey's child tax credit could increase from $500 per child to $1,000. 
• Utah has already implemented a $1,000 child tax credit for children ages 1 to 4. However, Utah’s child tax credit is non-refundable.