Family & Child Tax Credits

The Working Families Tax Credit is based on the federal Earned Income Tax Credit (EITC), considered one of the most effective anti-poverty programs of the federal government.

The Working Families Tax Credit is intended to amplify the effect of the EITC. It is designed to support New Mexico families who are working hard but still struggling to afford basic necessities. As a refundable credit, it not only reduces tax liability, but can result in a cash refund even after tax liability has been reduced to zero.  The Working Families Tax Credit was recently amended, in 2021, to allow individuals who are between 18 and 25 years of age to claim it, even though they are not eligible for the federal EITC.

The Low-Income Comprehensive Tax Rebate similarly is designed to help the state’s most at-risk taxpayers by offsetting sales taxes which tend to take up a larger proportion of low-income family’s wages, putting more money into their hands for basic needs. The Low-Income Comprehensive Tax Rebate was also amended in 2021, both increasing its amount and indexing it for inflation.

New Mexico Personal Income Tax Credits and Rebates

Figure: Indicates that from 2014 to 2022 state tax credits and rebates ranged from $187,000 for the Child Day Care Credit to $105.1 million for the Working Families Tax Credit.

Data source: New Mexico Taxation and Revenue Department (TRD), Tax Analysis, Research and Statistics Office 1. Tax Years 2014-2022, NM Personal Income Tax (PIT) Return data

Federal Tax Credits

Figure: Shows that federal tax credits for New Mexico tax payers raising children ranged from $7.1 million for the Child and Dependent Care Credit in 2020 to $535.6 million for the Earned Income Tax Credit in 2015.

Data source: IRS Statistics Of Income (SOI), Tax Years 2014-2018 1. With the Tax Cuts & Jobs Act (TCJA), the maximum amount of the Child Tax Credit doubled from $1,000 to $2,000. In addition, a new credit for other qualifying dependents was added. The SOI statistics list the aggregate amount for both credits. 2. Per SOI notes, this reported amount is both the refundable and non-refundable portions.