States Should Invest in Their Communities by Enacting and Expanding Child Tax Credits and Earned Income Tax Credits
A flourishing and economically just nation is one where states make abundant investments so that everyone has the foundation they need to thrive. One step they can take is enacting and expanding state-level tax credits that help individuals and families afford the basics while reducing poverty, which research has found helps provide improved child and maternal health, school achievement, and other benefits. Fifteen states[1] have enacted a child tax credit, and 31 states plus the District of Columbia and Puerto Rico have enacted their own version of the federal Earned Income Tax Credit (EITC).
These state-level child tax credits and EITCs build on the success of both federal credits. And like the federal versions, they are an important tool for advancing equity: people of color, women, and people who immigrated to the United States are overrepresented in low-paid work and in families with little to no earnings, due in part to structural barriers like labor-market discrimination and underinvestment in their schools and communities. And by bolstering families’ incomes, the credits also boost local communities and state economies.
In 2025, several states improved existing credits or enacted new ones. They include:
- Boosts for young children: Maine doubled its credit for children under 6 to about $600 and New York increased its credit for children under 4 from $330 to $1,000. They join Colorado as the only three states with additional boosts for young children. Early childhood is a critical time for child development and is also a time when families experience higher poverty rates due to the challenge of balancing caregiving and earning income. An increased child tax credit for young children will support families when they need it most.
- A new child tax credit: Georgia will become the 15th state with a child tax credit when it becomes available for tax year 2026. However, the credit is not refundable, meaning that if the credit exceeds a filer’s income tax liability, they do not receive the full value. Lawmakers, both in Georgia and in other states with non-refundable credits, could improve their credits by making them refundable and including families who earn the least.
- Increased credit amounts: Montana and Virginia both increased the value of their refundable EITCs to 20 percent of the federal credit. Increasing credit amounts helps families afford the basics, especially as prices remain elevated and as the harmful megabill recently enacted by President Trump and congressional Republicans jeopardizes families’ access to health care and affordable groceries nationwide.
Vermont, meanwhile, supplemented the federal EITC, which has limited benefits for workers without children in the home. The state expanded its credit for this group to 100 percent of the federal credit, recognizing them as integral members of their communities and local economies. Many of these workers are non-custodial parents or likely future parents. Vermont joins three states and D.C. in partially addressing this inequity in the federal credit.
Many States Have Their Own EITC or CTC
States with a state Earned Income Tax Credit or Child Tax Credit
These credits are among several income assistance policies such as guaranteed income programs and Temporary Assistance for Needy Families that provide families with a stronger foundation and begin to address income-related racial inequities. Unrestricted and unconditional cash gives families the autonomy to best address their individual needs while ensuring they can buy necessary items, like diapers and personal hygiene products, that other economic security programs don’t cover.
Lawmakers in states without their own child tax credit or EITC should enact them. States that have limited their credits should make these credits refundable. States should also expand their credits to those left out of each federal credit, particularly by ending exclusions for people who are immigrants who do not have a Social Security number.
States should protect and improve programs that give unrestricted cash to families, like child tax credits and EITCs, as state budgets and families’ wallets strain under the harmful Republican megabill. Many states will need to make tough budget decisions as they are forced to take on substantial new costs for Medicaid and food assistance through SNAP — previously borne by the federal government — while balancing their own budgets. At the same time, millions of families will lose their health insurance and food assistance, putting the basics even further out of reach. In the face of fiscal and economic uncertainty, child tax credits and EITCs have a proven record of helping families afford the basics and reducing poverty, in turn helping them thrive in the long run.
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End Notes
[1] The District of Columbia enacted a child tax credit in 2024, which would have gone into effect for tax year 2025. However, the credit is likely to be repealed in the fiscal year 2026 budget.