Stronger Families, Stronger Virginia: Why Virginia Needs a Child Tax Credit

Every family, regardless of how much money they make, should have the opportunity to prosper and raise their children with the resources they need to thrive. Yet the rising cost of raising children continues to put financial pressure on families across Virginia. While the federal Child Tax Credit has been an important tool to boost family income, its eligibility rules prevent many families with low incomes from receiving the support they need, limiting their children’s opportunities and worsening their economic security. That is why Virginia should create a Commonwealth Kids Credit, a statewide Child Tax Credit that will help more families afford the everyday costs of raising children. 

Well-Designed Tax Credits Improve Outcomes for Everyone 

When families can better afford the cost of raising children, everyone benefits. Child Tax Credits and other income-support policies are proven tools that help families and children in meaningful ways. Overall, tax credits help children stay healthy, do better in school, and help families and individuals earn more over time. When families can afford the essentials, babies and mothers are healthier, giving children a better chance to succeed from an early age. Refundable Child Tax Credits, which allow families to receive the entire credit even if they owe little or no income tax, are also a proven tool to lift children out of poverty. A 2022 study estimated that in almost all states, a state-level refundable tax credit of less than $2,000 with a 20% add-on for young children would lead to a 25% reduction in child poverty. 

But families and children are not the only ones who benefit from a well-designed Child Tax Credit. When families have more money to spend on child care, groceries, or activities in their communities, economic activity grows and local economies become stronger. Tax credits also help improve long-term health and lower rates of work disability, helping more people stay healthy and engaged in their communities while making sure health care and disability resources are available for those who need them most in the years ahead. 

A Virginia Child Tax Credit Can Advance Racial and Economic Equity

Virginia needs a statewide Child Tax Credit because today’s federal credit leaves out too many children in low-income families, especially Black and brown children. Historic and ongoing discrimination — including redlining, hiring discrimination, unequal access to housing and education, and exclusion from wealth-building government programs — has unequally pushed families of color into low-paying jobs and left them with far less inherited wealth than white families. 

Today, those inequities continue to shape who can access stable jobs, wealth, and economic security. Yet, our tax code often favors those with higher incomes, while asking more of families with lower earnings and excluding them from programs that offer the critical support that they need. As a result of the current federal tax code, nearly half of children in Black, Hispanic, and Native American families are excluded from receiving the full benefits of the federal Child Tax Credit. 

The 2021 Federal CTC Expansion Showed What’s Possible

In 2021, Congress temporarily expanded the federal Child Tax Credit through the American Rescue Plan Act (ARPA), increasing the maximum credit to $3,600 for children under age 6 and $3,000 for children ages 6 to 17. The expansion also made the credit fully refundable and extended the full credit amount to children in families with low or no incomes, allowing families to receive the full benefit regardless of how much they made. As a result, children who had previously been excluded from the full credit — particularly Black and Latino children — became eligible to receive the maximum benefit. 

Families used this additional income to pay for everyday needs such as childcare, nutritious and balanced meals, utilities and housing, tutoring, and extracurriculars. Many families were able to pay off debts, avoid evictions, build emergency funds, and rely less on high-risk financial services such as payday loans. The expansion contributed to child poverty being cut nearly in half, dropping to a record low of 5.2% as measured by the supplemental poverty measure.

Recent Federal Changes Fall Short

The 2021 improvements have since lapsed, and recent federal tax changes did little to address the credit’s underlying shortcomings. The 2025 Trump tax law, known as the “One Big Beautiful Bill Act” (OBBBA), included only a small increase to the federal Child Tax Credit, but left in place numerous barriers that prevent many low-income families from receiving the full credit. 

Because of how the credit is structured, families with lower incomes receive a much smaller credit than households with higher incomes, and families making less than $2,500 a year are completely excluded from the credit.  Meanwhile, families that make up to $400,000 a year remain eligible for the credit, but in practice, benefit from it far more than families who need the most financial support. The design flaws of the federal CTC mean that, in 2025, a single parent who earned $16,000 would receive just $1,013 for one child, while a married couple who made $400,000 would receive $2,000 per child, almost double that amount.

Additional design choices further limit who benefits. “Refundability caps” limit how much money low-income families can actually receive from the credit in cash, making it even harder for them to afford basics like food, diapers, and rent. New federal rules exclude up to an estimated 2.7 million children by requiring both the child and a parent to have a Social Security number to qualify for the Child Tax Credit, a change that would harm Latino and immigrant families the most. 

Virginia has the opportunity to change this. By creating a statewide Child Tax Credit, lawmakers could make sure that every child in Virginia, no matter their race or economic background, has the support they need to reach their full potential. 

Success Stories in Other States

Initiatives in other states have shown that Child Tax Credits help families and communities succeed. Across the country, including in California, Colorado, Illinois, Maryland, Maine,  Massachusetts, Minnesota, New Mexico, New Jersey, New York, Oregon, Vermont, and Washington, D.C., lawmakers have recognized the rising cost of raising children and created state Child Tax Credits to make life more affordable for families. By designing credits that are strong, inclusive, and targeted to those who need them most, these states are helping families of all backgrounds build a more secure future while giving more children the opportunities and resources they need to thrive.

• Maine has continued to strengthen its statewide Child Tax Credit over time. In 2017, the state created the Dependent Exemption Tax Credit, giving families $300 for every dependent. Recognizing that many families with low incomes were still left behind, lawmakers expanded the credit in 2023 by removing minimum income requirements, opening the door to 50,000 more low-income families. The credit is also designed to be continuously adjusted for inflation to help families keep up with the rising costs of childcare, groceries, gas, and clothes. In 2025, lawmakers doubled the credit for each child under age 6, increasing it from $300 to $600, and further targeted the credit to families who need it the most by phasing it out for those making over $100,000 a year, or $150,000 for married joint filers. These credits have helped Mainers put food on the table, pay for utilities and rent, buy school books and clothes, and make sure their children are cared for and ready to learn. 
  
• New Mexico has also shown what is possible when states invest in their families and children. Alongside other family-focused policy initiatives in New Mexico, the state’s targeted Child Tax Credit program helped lift children out of poverty and strengthen economic security for families, especially for those with historically low incomes. Because the credit is fully refundable, families are able to get the economic support they need, even if they owe little to no state income tax. As of 2025, New Mexico became a national leader in reducing child poverty, reducing its poverty rate from 17.1% to 10.9%, and helping lift over 120,000 people out of economic hardship through investments in early childhood development and education programs.
  
• In November 2025, the District of Columbia restored its Child Tax Credit to protect families from harmful federal changes. The district used emergency legislation to unlink its tax code from OBBBA, making sure families who need the most financial help are able to receive it. The D.C. Child Tax Credit offers up to $1,000 per child and is fully refundable. The DC Fiscal Policy Institute estimates that this tax credit will benefit nearly 78,000 children, and combined with an expanded Earned Income Tax Credit program, reduce child poverty in the district by 20%.
  
• Minnesota made history by passing the nation’s largest state-level Child Tax Credit in 2023, providing families with a fully refundable $1,750 credit per child under age 18. Families can choose to receive half of the credit through three advanced monthly payments in August, October, and December, giving them earlier access to money for everyday expenses. The Minnesota CTC could reduce child poverty in the state by one-third.
  

Designing a Child Tax Credit that Works

Virginia should follow the lead of the 18 states (plus D.C.) that have adopted Child Tax Credits by creating a Commonwealth Kids Credit — a strong, inclusive, and fully refundable Child Tax Credit that lifts up families who need it most. When families win, we all win. 

How a Child Tax Credit is designed determines who benefits from it. To deliver meaningful support and improve outcomes for children and their families, tax credits should be refundable, accessible to families regardless of how little income tax they owe, and targeted toward households facing the biggest financial challenges. Policymakers can further strengthen its impact by providing additional support for younger children and gradually phasing out the credit for higher-income households.

Virginia’s 2025 tax rebates show us why policy design matters. While the 2025 rebates provided some households with short-term financial relief, they were tied to state income tax liability, leaving many families with low incomes with little to no benefit. Families with incomes below the filing threshold, along with many people whose income came primarily from Social Security, unemployment, or disability benefits, were effectively excluded. On top of that, the rebates were first applied to outstanding debts before families could use them, leaving many households already facing significant financial hardship with less flexibility to cover more immediate needs. 

Like similar rebates in previous years, the 2025 payments also provided only temporary support. While one-time payments can help families cover an urgent bill or put food on the table for the week, they do not provide the reliable support families need to budget for recurring expenses such as childcare, housing, groceries, and school supplies. Because of this, despite their short-term benefit, the rebates likely did little to lift children out of poverty or strengthen families’ long-term economic security. 

Virginia can build on these lessons by creating a Child Tax Credit that reaches the families who need it most. A well-designed credit can provide families with reliable support and make a greater impact on affordability, child poverty, and long-term economic security. Virginia lawmakers have already begun exploring that approach.

Recent legislative sessions have included several proposals to put money back in the pockets of families across Virginia through a Commonwealth Kids Credit. In 2026, for example, lawmakers proposed one-time, refundable tax credits of $300 per child under 13 (House Bill 1004) and $400 for children under 6 (HB 1074 and HB 979) — both targeted to families with incomes of $100,000 or less. Other proposals, such as HB 969 in 2024, have been designed to provide not just one-time relief, but ongoing support for multiple years, which would have made the credit a stable resource that families could count on.

While these bills did not become law, their introduction reflects growing recognition that Virginia families need additional support and that a Child Tax Credit is an effective tool to make raising children more affordable and help families build long-term economic security. 

Looking Ahead: Investing in Virginia’s Future

As we look for ways to make life more affordable for Virginia’s families and communities, it’s time to invest in proven solutions. A well-designed Child Tax Credit would help reduce child poverty, strengthen economic security for families, and make sure more of Virginia’s children have the resources and opportunities to succeed. 

Virginia has already taken important steps to support working families through policies like improving the Earned Income Tax Credit, creating a Paid Family Medical Leave program, increasing the minimum wage, and expanding worker protections — making Virginia a better place for people and families to work, live, and thrive. Creating a Commonwealth Kids Credit is the next logical step toward building a fairer tax system that works for everyone, not just those with the highest incomes. Investing in children and their families is ultimately an investment in the Commonwealth’s future. When families thrive, so do our communities, our economy, and our shared future.