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Why don’t more eligible Asian Americans benefit from the earned income tax credit?

This post was originally published here (Urban Institute Research)

May was Asian Pacific American Heritage Month, a time to celebrate the collective identity and diversity of Asian Americans and Pacific Islanders (AAPIs). Urban Institute researchers explored data that shed light on challenges faced by distinct AAPI groups and how these groups strengthen their communities.

The earned income tax credit (EITC) is “the single most effective federal antipoverty program for working-age households” and was responsible for lifting 6.5 million people out of poverty in 2015. It is an important tool in our social safety net and contributes significantly to the financial security of many Asian American families. Despite the “model minority” stereotype, more than 1 million Asian Americans claimed the EITC in 2013.

Many more Asian American families may be eligible for the credit, but do not claim it. Typically, this occurs because families are unfamiliar with the program and are therefore less likely to claim its benefits.

Just over half of low-income parents who are not Hispanic, black, or white are aware of the EITC, compared with 76 percent of white, non-Hispanic parents (the most informed group). More specific data on Asian American awareness of the program are unavailable, which illustrates the difficulty in learning more about how to best help Asian American families escape and improve the program. Tax data, just like criminal justice data, often fail to focus on Asian Americans.

In addition to having less awareness of the EITC, fewer Asian Americans may claim the EITC because they are more likely than others to live in complicated, multigenerational families. A Pew Research Center study found that about 28 percent of Asian Americans live in multigenerational families, the highest share of all the racial groups surveyed.

Research shows complex family living arrangements make it difficult to properly claim the EITC. Family incomes may fluctuate in unpredictable ways when there are a variety of people living in one household, and this makes it difficult to gauge eligibility for the credit. Multigenerational family living arrangements also make it harder to decide who should claim a child to determine the correct EITC benefits.

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Author: Yifan Zhang

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