State Child Tax Credits Boosted Financial Security for Families and Children in 2025

Key Takeaways

• Fifteen states provide Child Tax Credits to reduce poverty, boost economic security, and invest in children. Eleven states will offer fully refundable Child Tax Credits in 2026: California, Colorado, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New Mexico, New York, Oregon, and Vermont. And four – Arizona, Georgia, Oklahoma, and Utah – will offer nonrefundable credits.
• Lawmakers in five states – Maine, Maryland, New York, Utah, and Vermont – expanded their existing Child Tax Credits this year, while lawmakers in Georgia created the state’s first nonrefundable Child Tax Credit. Particular focus was given to expanding credits for young children this year.
• To maximize impact, lawmakers should consider making their credits fully refundable, avoiding earnings requirements, setting a maximum amount per child instead of per household, setting state-specific phase-out ranges that target low- and middle-income families, indexing to inflation, and offering the option of advanced payments.

Introduction

Child Tax Credits (CTCs) are effective tools to bolster the economic security of low- and middle-income families and position the next generation for success. When designed well, they build on the powerful base of the federal CTC, counteract some of its deficiencies, and lead to meaningful reductions in child poverty and deep poverty.¹

More state lawmakers are choosing to help families in this way: for the 2026 tax year, 15 states will provide Child Tax Credits, many of which are targeted to those who most need them and refundable so children in the lowest-income families receive the full benefits. Together these credits constitute an annual multibillion-dollar investment in the next generation. As more states consider creating or strengthening these credits, lawmakers should design them for maximum impact.

Child Tax Credits: A Critical Tool to Help Families Make Ends Meet

Refundable Child Tax Credits boost the after-tax incomes of qualifying families and offset some of the costs of raising children. These policies are especially important for the economic security and stability of lower-income families, helping them avert unexpected hardship that can threaten basic needs like housing, food, and utilities. Child Tax Credits are associated with reduced poverty, higher financial and household stability, improved child and maternal health, better educational achievement, stronger future economic outcomes, and more.² These benefits are stronger with well-designed credits.

CTCs help families of all races. The largest share of recipients are white children. When designed well, these credits are particularly helpful to the lowest-income families and can make up for some of the damage done by other policies that hurt poor children and particularly harm Black, Hispanic, and Indigenous children.³ Economic inequality, low wages, and child poverty are defining challenges in the U.S. Historic and ongoing discrimination mean these problems disproportionately harm Black families and other families of color. CTCs help address these challenges.

Recent changes to the federal CTC boosted the credit from $2,000 to $2,200 for each eligible dependent under the age of 17. The credit is now also indexed to inflation. It phases out for married couples with incomes above $400,000 and for unmarried parents with incomes exceeding $200,000. While these changes will move more money to families,⁴ lawmakers did not make the credit fully refundable. This means low-income households can only receive $1,700 per child as a refund. Change to “This means low-income households can only receive $1,700 maximum per child as a refund. Children whose parents or guardians are deemed “too poor”, earning less than $2,500, remain ineligible. Changes to the federal CTC in 2017 required children to have a Social Security Number to receive the credit, denying 1.3 million children the credit who were previously eligible. Recent federal changes under HB1 go further, requiring at least one parent to have a Social Security Number, keeping the CTC from an additional 2.7 million children.⁵

In effect, the federal CTC maintains a trapezoid-like structure where some children are in families too poor to receive any credit, some fall within the phase-in range, some benefit from the full credit, some fall within the phase-out range, and some children do not receive the credit because their families have incomes that exceed the phaseout.

Since its enactment in the late 1990s, the federal CTC has grown and changed. For instance, the 2017 federal tax law increased the credit from $1,000 to $2,000 per child through 2025, reshaped it to allow more affluent families to claim it and began excluding immigrant children without Social Security numbers.⁶  Before this, all children whose parents met the income eligibility requirements, regardless of citizenship status, received the federal credit.

The American Rescue Plan Act of 2021 (ARPA) temporarily expanded the credit—for 2021 only—to $3,000 for older children and $3,600 for children under 5. It was also reformed to allow monthly credit payments rather than one annual lump sum. Most importantly, it was reworked to reach more children, including nearly one-third of children who live in families too poor to qualify for the credit under permanent law. In 2022, after the credit expansion expired, 45 percent of Black children, 42 percent of Hispanic children, and 23 percent of white children were no longer able to receive the full credit.⁷ Current limits for lower-income families disproportionately leave out children of color.

The expanded version of the federal CTC in effect for 2021 was wildly successful in reducing child poverty, cutting it by 46 percent. It lifted 3.7 million children out of poverty before it was allowed to lapse in 2022.⁸ Research has since shown that low and middle-income households overwhelmingly spent this boosted credit on housing, food, and clothing – a testament to how vital an expanded CTC is to helping families make ends meet each month.⁹ In the absence of federal action to reinstate those reforms, state lawmakers are creating and expanding Child Tax Credits to boost income and opportunities for children and families in their states.

The 2025 federal legislation under HB1 expanded the Child Tax Credit but took few lessons from the success of ARPA. While the credit amount was increased and indexed to inflation, the bill limited access to immigrant families and did nothing to improve refundability, meaning children whose parents and guardians earn low-wages or are unable to work full-time are denied the full benefit of the credit.

More States Adopting and Expanding Child Tax Credits

State lawmakers continue to adopt and expand state Child Tax Credits. Looking ahead to 2026, 15 states will provide Child Tax Credit benefits to children in their states.

This year alone, lawmakers in six states created new or expanded existing Child Tax Credits. Lawmakers in New York, Maryland, Maine, and Vermont improved existing refundable credits. In Georgia, lawmakers enacted a new nonrefundable CTC and Utah lawmakers expanded an existing nonrefundable CTC.

• Lawmakers in New York made another round of important improvements to their Empire State Child Credit this year. Previously, households could receive a maximum credit of $330 per child under 17 years of age. The credit also included a phase-in that kept the lowest-earning families from receiving the full benefit. In 2026, those qualifying will now receive $500 per child with children under 4 receiving a boosted credit of $1,000. Lawmakers also eliminated the phase-in and extended the credit to households with no income. This expansion is set to sunset after 2027 unless extended.
• Georgia lawmakers passed a $250 nonrefundable child tax credit for children under 6.
• Lawmakers in Maine approved a boost for children under 6 who will now receive an additional $315 credit – on top of the base credit of $315 per child in 2026. Maine also lowered the threshold for their phasedown of the credit (limiting the credit to families making less than $165,500 a year) to cover the costs of the boost for young children.
• Maryland’s CTC, until this year, had a hard income cut-off of $15,000 of Adjusted Gross Income (AGI) which created a cliff and left families with AGI of $15,001 ineligible for the credit. Lawmakers approved a phasedown that will now allow qualifying households to claim a reduced credit until their income reaches $24,000 of AGI.
• Vermont and Utah both expanded the qualifying ages for children receiving their state credits. Children in Vermont will now qualify for the state’s refundable $1,000 per child credit until they reach 7 years of age. Children in Utah will now qualify for the state’s nonrefundable $1,000 credit until they reach 6 years of age.

A notable trend this year was the use of CTCs to particularly boost the incomes of families with young children. In addition to the expanded credits for young children seen in Maine, New York, Utah, and Vermont, similar legislation in other states gained momentum but did not ultimately result in policy change. Senate lawmakers in Indiana unanimously approved a refundable $500 credit for newborns. Lawmakers in Minnesota considered a $100 bump to their state CTC for the first year of a child’s life. And Ohio Gov. Mike DeWine included a $1,000 refundable CTC for children under 7 in his budget proposal.¹⁰

Unfortunately, other states went in the opposite direction this year. Idaho’s Child Income Tax Credit is set to sunset unless action is taken by lawmakers before January 1, 2026. Idaho’s credit was a nonrefundable $205 and available to households with children under 17 or permanently disabled dependents. Lawmakers in the District of Columbia also chose this year to not fund D.C.’s Child Tax Credit which was set to take effect in 2026. If implemented, the policy would have provided $420 per child under 6.

As lawmakers continue to deal with the fallout of the new federal tax and spending law, and in some cases steep and consistent state level tax cuts, some will look to cut existing programs and credits that are designed to help children and families. States should avoid removing policies that benefit those most likely to be harmed by economic uncertainty. State CTCs play an important role in state tax policy and broader efforts to support children and families, reduce poverty, and raise incomes of low- and middle-income families.

While most states have created CTCs that are independent of the federal Child Tax Credit, Oklahoma’s credit remains a percentage match of the federal CTC. New York’s Empire State Child Credit, until recent legislative changes, matched a previous version of the federal Child Tax Credit and will do so again if lawmakers allow the improved credit to sunset after 2027.

Oklahoma offers families a choice between a nonrefundable credit worth 5 percent of the federal CTC or a nonrefundable credit worth 20 percent of the federal Child and Dependent Care Tax Credit. The state limits the credit to taxpayers with incomes under $100,000. This credit does not fully reach families in or on the verge of poverty because it is nonrefundable, meaning it cannot be used by lower-income families who have little state income tax liability but pay substantial amounts of sales, excise, and property taxes. The increased federal CTC will result in Oklahoma’s maximum credit increasing from $100 to $110 per child in 2025.

States Should Design Child Tax Credits with Equity in Mind

The lapse of 2021’s federal Child Tax Credit enhancements has inspired a string of state actions and should continue to do so going forward. In the absence of additional action by Congress, states have several options to strengthen economic security and child well-being through new or expanded CTCs. Lawmakers should design these state CTCs with an eye toward equity by ensuring that the credit reaches as many low- and moderate-income children as possible.

1. Ideally, lawmakers should create standalone refundable CTCs where children benefit regardless of their family’s employment status.

The advantage of implementing a credit separate from the federal CTC is that states can avoid the shortcomings of the federal credit (particularly the earnings requirement and lack of full refundability) that keep many lower-income families from receiving the full benefit. Instead, states can use the flexibility they have to determine the scope and scale of their credits without these restrictions.

That flexibility allows state lawmakers to:

• Make the credit fully refundable. Refundability is key to the CTC’s success. If a credit is refundable, taxpayers receive a refund for the portion of the credit that exceeds their income tax bill. Refundable credits help offset all taxes paid, not just income taxes, mitigating some of the regressive effects of state and local sales, excise, and property taxes.
• Avoid an earnings requirement. Earnings requirements mean that families with lower earnings get a smaller credit or no credit at all, paradoxically excluding the kids with the greatest needs from a policy meant to help children.

• Set a maximum amount per child, rather than per household, to not penalize children in larger families. Lawmakers should also provide a more robust credit to younger children in their formative years when families confront significant expenses and caregiving responsibilities that require additional financial resources.
• Set state-specific phase-out ranges that better target the credit to low- and middle-income families. Setting a lower phase-out range enables the state credit to reach families in need while dramatically reducing the cost to state budgets. If lawmakers are most interested in poverty reduction, an administratively simple approach for states with Earned Income Tax Credits could be to mirror EITC phase-outs, creating a tightly targeted state CTC.
• Index the credit to inflation so it does not erode over time. Whether and how policies are indexed for inflation has major implications for their power to improve economic well-being and reduce poverty over the long run.¹¹
• Make the credit available on an advanced or monthly basis. Research shows that monthly cash payments reduce poverty and keep it lower year-round.¹² This provides families flexibility to meet financial needs in real time and prevent the accumulation of debt.
• Ideally, all children should be included, regardless of immigration status, in credit eligibility. However, caution should be used given recent drastic shifts in policy that have fundamentally changed the nature of immigrants’ relationship with the tax code and tax filing.¹³
• Local governments should also consider enacting local CTCs to supplement the benefits of the federal and, in many cases, state CTCs.

2. If unable to create a standalone credit, lawmakers could enact a CTC as a percentage of the federal credit in combination with a minimum credit.

States can piggyback CTCs on top of federal rules at a flat percentage rate, as many do with their EITCs. For example, a state CTC calculated as 10 percent of the federal CTC would amount to a $220 state credit in 2025 for any child who receives it in full. This offers a relatively simple template for states but has significant drawbacks including the relatively high-income thresholds for eligibility.

The worst feature of the federal CTC is that children in many families are deemed too poor to receive the full benefit. Even if state lawmakers choose to conform to the federal CTC broadly, they should take care not to amplify this inequity and should establish a minimum, refundable benefit for lower-income families.

3. Lawmakers could also opt to fill the gap for children left behind by the federal CTC.

State lawmakers can make up for the main shortcoming of the federal CTC by ensuring that children in families too poor to receive the full credit are brought up to the full $2,200 amount, or to some portion of that amount. This ensures that a state’s lowest-income children are not left behind. Of these three options, this is the most carefully tailored to reach only those families in the most vulnerable economic circumstances. As a result of its narrower reach, this option could also cost less than the other proposals, which may be appealing to some lawmakers concerned about the budgetary impact of more expansive CTC proposals.

Under any of these options, states should explore advanced or monthly payments in addition to annual payments. Recent federal experience suggests that this approach can play a role in meaningfully reducing child poverty, improving economic security, and enhancing families’ ability to meet their basic needs.¹⁴