Growing up, Iris Nuño thought a college degree would be her golden ticket to financial stability.
Her family moved from Guadalajara, in the western Mexican state of Jalisco, to the United States when she was 8 years old. Her father’s church called him to serve at the Columbia Heights Church of the Nazarene on San Antonio’s South Side.
“We did OK,” Nuño said, but she wanted to make sure she could provide for herself.
After attending Southern Nazarene University in Oklahoma City, she returned to San Antonio and worked various low-paying jobs, eventually becoming an assistant teacher making $24,000.
“I think it hit me when I got pregnant, and I realized, ‘Oh, my goodness, I have a mouth to feed. What am I going to do?'” Nuño said.
Child care for her young son and other expenses put her in debt. She received a substantial raise in October (up to about $52,000 a year) when she became a full-time Spanish teacher at Promesa Academy Charter School, but it wasn’t enough to dig out.
Meanwhile, her energetic 6-year-old son, Jared, dreams of a house with a yard for a dog. They currently live in an apartment near U.S. Highway 281 and Blanco Road.
Nuño sees new prepayments of an expanded child tax credit – part of the American Rescue Plan Act, the latest federal stimulus bill aimed at helping the nation through the coronavirus pandemic – as a much-needed boost in making sure her son’s needs are met. And for the estimated 97,000 San Antonio children living below the poverty level the impact could be significant, if temporary.
Starting in July and continuing through December, most parents will receive $250 to $300 monthly in direct payments. Some experts say it could cut child poverty nearly in half.
“I feel that finally, I’m going to be able to … get rid of that debt,” Nuño said. She wants to start a savings account for Jared and buy a home. “Even if it’s a tiny, two-bedroom, I feel that he’s going to feel a lot more comfortable.”
The $1.9 trillion stimulus plan expands the existing federal Child Tax Credit from $2,000 to $3,000 per child for ages 6 to 17 and to $3,600 per child for under the age of 6. The plan provides for “periodic” installments of about $300 starting in July as advances on the tax credit. The remainder would be claimed as a credit on 2021 taxes.
The benefit begins to phase out for wealthier parents who make more than $75,000 on single-filer returns, $112,500 on head-of-household returns, and $150,000 on joint returns. Still, parents of more than 93 percent of children in the U.S., or 69 million kids, will receive the payments this year as a result of the plan, the New York Times reported.
Two online calculators – from Kiplinger and the Washington Post – estimate that Nuño will receive $250 per month (Jared will turn 7 soon) through the end of the year and will be able to claim a $1,500 credit on her 2021 tax return.
What can $300 do?
For a lot of families that the YWCA San Antonio serves, an extra $300 means being able to buy more groceries, close a cost gap for child care, or pay for repairs on a vehicle that gets them to work, said Francesca Rattray, CEO of the nonprofit agency. The YWCA provides services such as child care and career counseling for families such as Nuño’s.
The fact that the benefit doesn’t come with restrictions on what the money can be spent on will allow families – each with unique needs – make the best decisions for themselves, Rattray said. “Keeping it open is the humane thing to do.”
The extra $300 will mean a lot to low-income families, but it won’t necessarily lift them out of poverty, she said, because even families above the poverty line aren’t making a living wage.
Many families that will earn technically above the federal poverty level will still struggle even with the extra money, said Megan Legacy, CEO of the SA Hope Center, which provides courses on financial literacy, parenting, job readiness, and other skills.
“I do think that this program has potentially some major impacts on families who just needed a few of those gaps filled … but it is temporary,” Legacy said, noting that the expanded tax credit and prepayments apply only through December. “If they go from a household income of $12,000 to $16,000, they still don’t have their basic needs met.”
She worries that the general public may have the perception that the stimulus plan “fixed poverty.”
The federal poverty level is used as an eligibility standard for who qualifies for benefits, but it doesn’t calculate the full picture of financial stress, such as costs of living that can vary widely by region.
“It’s a step in the right direction, but for families to work towards a living wage, we have to make more investments in workforce development and access to child care,” Legacy said.
Many families who will receive the payments and tax credit are well above the poverty line and haven’t experienced any loss of income over the year.
“The framing of the [plan] is really is focused on economic stimulation,” said Brandon Howard, a certified public accountant and a professor at the University of Texas at San Antonio. “If we give liquid income to the majority of Americans, hopefully that will get them to go out, spend money, put that into the economy in some fashion or form.”
He’s spoken to several residents who feel like they don’t “need” the previous stimulus checks or child benefits.
“The idea is, the economy does need it,” he said. “And by going out, get spending some of that stimulus, then we do get to indirectly help those that do need it, because it’ll create jobs again, and it’ll help people stay employed.
“For example, if you feel comfortable and safe getting out and about in these times, visiting a local, family-owned restaurant that could use your patronage – that’s a great way to spend that stimulus money because you’re helping small business, which helps San Antonians all across the economic spectrum.”
For Nuño and son Jared, that money will be put to immediate use to pay off debts. But whether the expanded child tax credit will help her achieve her longer-term financial goals depends on whether the tax credit provisions are extended beyond December.
Howard warns parents who receive monthly payments to brace themselves come tax season in 2022.
“The unsuspected surprise and the trade-off here is that means the eventual refund at tax time next year is maybe going to be a little smaller, because they’ve already [received some of that] money,” Howard said.
“The prepayment of a credit like that is a pretty novel concept” in the U.S., he added. While getting a one-time tax refund is great for many families, “$1 in my bank account today … is more valuable to me than $1 tomorrow, because I can spend $1 today, and use it for some sort of beneficial purpose, whether that’s an investment, whether that’s buying lunch for my kids, or helping them with school supplies that they need right now.”
The American Rescue Plan identifies July as the start date, but that may be delayed as the Internal Revenue Service struggles to manage the ongoing coronavirus pandemic stimulus payments and the extended 2021 tax season, according to IRS Commissioner Charles Rettig.
Whenever the payments start, it will be a welcome help, Nuño said.
“That money is going to help me so I can pay off bills,” she said, “and to try to put some money aside for my son, because I do worry about the future. I mean, with all these things happening [in 2020 and 2021], you just don’t know.”