TIRACHARD-KUMTANOM/SHUTTERSTOCK
What if former foster youth could claim up to $1,500 in tax benefits and nobody told them?
With the passage of the American Rescue Plan, this is the reality for thousands of older and former foster youth who are newly eligible for one of America’s premiere anti-poverty programs: the Earned Income Tax Credit or EITC.
Since its inception in 1975, the EITC has lifted countless working Americans out of poverty. In 2018, it helped 5.6 million people, including about 3 million children, avoid poverty. The program has traditionally enjoyed bipartisan support, expanding under both Democratic and Republican administrations alike. Yet despite the program’s growth, the EITC has provided a meager benefit to adults without children ($500 maximum) and no support at all to childless adults under age 25.
The passage of the American Rescue Plan has changed that — at least for one year. Young adults who are working but earn less than $21,000 per year are finally eligible for this support, money that can assist youth trying to put themselves through college or just make ends meet during a key transitional period in life. For former foster youth and homeless youth, eligibility begins at age 18.
Greg Srolestar
In 2015, I spoke to Guardian Scholars, former foster youth enrolled in college, and asked them what they would do with an extra $500-1,000 per year. Like many young people, they said they would use the money to pay tuition or school fees, cover other living expenses, and help younger relatives.
But what really stood out was that a couple hundred dollars could make the difference between succeeding in school and not making it. As one young woman put it, “Sometimes I have to work extra hours just to make rent, and it impacts the time for studying.” Another lamented, “Since [turning] 18, financial difficulties have made me very stressed out.” Unlike their peers, most young people coming out of the child welfare system can’t rely on parents or grandparents for financial support.
This jibes with the findings of academics who study young people who have aged out of foster care. Researchers at Chapin Hall found that young people emerging from foster care earn less than half of what their non-foster care peers earn and more than 25% report not having enough money to pay rent.
In response to these findings and an effort to smooth the transition to adulthood, the federal government encourages states to offer “extended foster care,” where young people can benefit from state support for several years beyond age 18. More recently, some have called for a guaranteed income of $1,000 per month for former foster youth that lasts until age 25. These are worthy efforts, but there are additional steps we can take right now to help young people get the support they deserve.
First, Congress needs to make the EITC expansion permanent. One year of support simply isn’t sufficient. As shops reopen and youth employment rebounds, income supports that go to low-wage workers will be even more important than during the pandemic.
Second, youth might need help to get this money. To benefit from the EITC, youth need to file a federal tax return. Approximately 10% of Americans do not file tax returns and many who do file fail to claim all the benefits they are due. Youth need to be aware of the credit and be sure they are qualifying for the EITC as a former foster youth or otherwise eligible young person. Social workers and programs geared toward older and former foster youth need to let youth know about this benefit. Young people who need assistance completing a tax return can get help from the IRS’ Volunteer Income Tax Assistance program.
American institutions are increasingly recognizing that there is no magic moment at age 18 when a child becomes an adult. And polling shows that the public believes young people emerging from the child welfare system deserve support. We are at a critical moment where the social safety net can provide a leg up to one of our country’s most disadvantaged populations. We would be foolish to let this moment pass.
Greg Srolestar is a policy analyst and currently works as Director of Technical Assistance for Fair and Just Prosecution.
