If the New York Child Tax Credit Is Expanded, Families Could Save or Invest More

For New Yorkers who are also parents thinking of saving and investing for their kids’ futures, Governor Kathy Hochul has released a new proposal that could help them achieve their goals. The proposal, announced in a Jan. 6 press release, is a refundable child tax credit for the tax year 2025 worth up to $1,000 per child under the age of 4 and up to $500 per child between ages 4 and 16 (the latter benefit wouldn’t take effect until 2026).

“In both cases, the credit would be fully refundable, meaning that families can receive the full value of the credit even if they do not owe state income taxes,” said Elaine Maag, senior fellow at the Tax Policy Center. “This is similar to how the federal child tax credit was structured in 2021, which dramatically reduced child poverty.”

According to the governor’s office, the average credit that families receive is $472, which is expected to increase to $943 under this plan. The proposal also raises the $110,000 household income threshold by adding a gradual phaseout for households with income of up to $170,000.

If you’re eligible and have qualifying dependent children, you might be able to claim both the New York child tax credit (officially called the Empire State Child Credit) and the federal child tax credit, which has less narrow requirements. That could net you thousands of extra dollars next year that you can use to improve your child’s and family’s financial outlook. Of course, you don’t have to wait a year to take action toward saving and investing for your future. You can do that now with your 2024 tax refund, which would allow you to take advantage of high rates on CDs and savings accounts right now.

3 Ways To Use a $1,000 Tax Refund

Any windfall you receive—whether it’s a tax refund, work bonus, or gift—can be put toward saving, investing, or paying down debt. Here are three ways you can use a $1,000 tax refund to benefit your financial future.

Pay Down Debt

Putting your tax refund toward paying off debt may not be the most exciting way to spend the unexpected cash, but it comes with some of the most substantial rewards. That’s because high interest rates create an ongoing drain on your finances that can make it challenging to save for larger expenses in the future, such as your child’s extracurricular activities and education. A little goes a long way in climbing out of the hole, and debt repayment strategies like the snowball method can give you a sense of satisfaction and peace of mind.

Save in a High-Yield Savings Account or CD

 While the average savings account pays under 0.5% in interest, high-yield savings accounts offer APYs as high as 4.75%. Stash your $1,000 tax credit into a high-yield savings account and you have the beginnings of a solid rainy-day fund. One year from now, that $1,000 will be worth $1,047.50 (assuming your rate stays the same and you don’t contribute any more money to the account).

Certificates of deposit (CDs) are another high-yield option for saving money. While CDs limit access to your money for the duration of their term, they offer even higher APYs than other types of deposit accounts. The 8-month CD from Nuvision Credit Union, for example, has an APY of 5.50%.

Invest for the Future

Investing your tax refund with one of the best brokers or trading platforms means you can take advantage of gains through stocks and ETFs. You’ll need to open a brokerage account and choose which securities you want to buy, and that does carry an element of risk in that you can’t usually predict which way the market will turn. However, the S&P 500 index, a commonly used benchmark of market performance that tracks the top 500 publicly traded companies, has returned an annual average of about 10% since 1957, before adjusting for inflation. That means your $1,000 investment could be valued at $1,100 after just one year.