Many New Jersey families are set to receive bigger payments from the state to help offset the high cost of raising children amid a period of sustained inflation.
A temporary enhancement of New Jersey’s child tax credit approved late last month increases benefits by 25%, starting with the current tax year. As a result, the maximum per-child benefit will total $1,250, up from $1,000, through the 2028 tax year.
Launched in 2022 in the wake of the COVID-19 pandemic, New Jersey’s child tax credit allows the parents of children age 5 and under, and who are earning as much as $80,000 annually, to claim the state-funded tax breaks.
The expansion comes as the annual inflation rate continues to soar above the 2% Federal Reserve benchmark .
Price increases slowed somewhat in June, according to the latest data collected by the federal Bureau of Labor Statistics. The annual inflation rate, though, totaled 3.5% last month, and economists expect inflation to remain elevated due to an escalation of President Donald Trump’s ongoing war with Iran.
“By increasing the child tax credit, we’re putting money back into the pockets of hard-working families and helping ease the economic pressures they are facing across our state,” said Senate Budget and Appropriations Committee Chair Paul Sarlo (D-Bergen) as the proposal moved through the Legislature in late June.
Detriment to parents
In New Jersey, the cost of raising a child has emerged as a key concern in the pandemic’s aftermath.
Last year, NJ Spotlight News reported on a study that found New Jersey families typically spend as much as 19% of their monthly household budgets on child care, far more than the 7% considered affordable under federal guidelines. In October, a Rutgers University’s Eagleton Center for Public Interest Polling survey found that more than half of those contacted for the poll considered a lack of access to affordable child care a detriment to working parents.
New Jersey’s child tax credit ranges from $250 to $1,250 per child. Those earning $30,000 or less are eligible for the largest benefits, while those earning from $60,000-$80,000 qualify for the smallest credits.
The tax break is provided as a refundable credit, which allows eligible families to claim the full amount of their per-child credit, regardless of what they owe in state income taxes.
The size of the individual tax credits was most recently increased in 2023, when lawmakers worked with then-Gov. Phil Murphy to double what had been a $500 maximum benefit. More than 232,000 New Jersey households claimed the tax credit during 2024 fiscal year, according to state Department of the Treasury data
The same agency estimated a $207 million cost of providing the tax breaks to eligible families during the 2027 fiscal year, which began July 1.
The enhancement was included in a budget agreement announced by Gov. Mikie Sherrill and fellow Democrats who control the Legislature in late June. It will cost an additional $52 million annually, according to a fiscal estimate prepared by the nonpartisan Office of Legislative Services.
Apply online
A related effort announced by the Sherrill administration in recent days will attempt to make it easier for all eligible families to claim credits, even if they are not required to file a state tax return due to their income.
The effort, in a partnership that included the New Jersey Innovation Authority, led to the creation of a website called SimpleFile that allows applicants to apply for the child tax credit directly with the state. The free online tool offers instructions in English and Spanish and applications can generally be completed within 15 minutes, state officials said.
“Helping more New Jersey families benefit from our state’s Child Tax Credit is one of the most direct ways we can make life more affordable, because every dollar matters for parents who need childcare, groceries, clothes, and other essentials,” Sherrill said.
New Jersey is one of 15 states that offer tax breaks to adults raising children, according to a report published last year by the Washington, D.C.-based Institute on Taxation and Economic Policy.
The report recommended that states enact child tax credits that are provided on a per-child basis and as a refundable benefit, two features that are in place in New Jersey.
Other recommendations included the indexing of tax credits to inflation and offering eligible families the option of receiving advance payments from the state.
“Research shows that monthly cash payments reduce poverty and keep it lower year-round,” the report said. “This provides families flexibility to meet financial needs in real time and prevent the accumulation of debt.”
This story is made possible in part by the Corporation for Public Broadcasting, a private corporation funded by the American people.
