Family & Child Tax Credits

New Mexico provides several tax credits and rebates for families.

The Working Families Tax Credit (WFTC) is based on the federal Earned Income Tax Credit (EITC), considered one of the most effective anti-poverty programs of the federal government. Intended to amplify the effect of the EITC, the WFTC 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, allowing individuals who are between 18 and 25 years of age to claim it even though they are not eligible for the federal EITC, and increasing the credit from 20% to 25% of the federal EITC.

The Low-Income Comprehensive Tax Rebate (LICTR) 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.

In 2023, Gov. Michelle Lujan Grisham signed into law an expansion of a new state Child Tax Credit (CTC) available to New Mexicans who file a state Personal Income Tax return. In addition to any federal Child Tax Credit a family may be eligible for, New Mexican families raising kids can also claim this state-level refundable credit up to $600 per qualifying dependent, depending on income.

Figure: From Tax Years 2014-23, New Mexico has put $1.152b of tax credits/rebates into the hands of families raising chldren. In the first year of the new state Child Tax Credit, more than $131m was refunded to 237,000 families covering more than 434,700 children.

Data source: New Mexico Taxation and Revenue Department (TRD), Tax Analysis, Research and Statistics Office, Tax Years 2014-2023, NM Personal Income Tax (PIT) Return data

Figure: From Tax Years 2014-21, New Mexico tax payers raising children have received nearly $8.5b in federal tax credits/rebates.

Data source: IRS Statistics Of Income (SOI), Tax Years 2014-2021

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.
3. Under the American Rescue Plan Act of 2021, the Child Tax Credit increased up to $3,600 for a qualifying child under age 6 and up to $3,000 for a qualifying child over age 5 and under age 18 depending on income. The CTC was made fully refundable and included 17 year old dependents were made eligible. Other dependent care was not enhanced. In addition, the IRS reconfigured child tax credit reporting. The Child and Other Dependent Care tax credit was renamed Nonrefundable Child and other Dependent Tax Credit. The Child and Dependent Care Credit was renamed Nonrefundable Child Care Credit. The Additional Child Tax Credit was renamed Refundable Child Tax Credit or Additional Child Tax Credit. The Refundable Child and Dependent Care Credit was newly created.