News   |   Sign Up   |   A LEVER FOR SCALE

Tax Credits and Policies

This policy inventory compiles some tax policies that states can choose to put into place to support economic security for families with young children.

State Child Tax Credit
  • Enacting a child tax credit at the state level

States can set their own eligibility criteria and credit amounts and can make the credit refundable or not.

Fourteen states have enacted a child tax credit in addition to the federal credit. Some states’ CTCs are refundable. Some state have included children with an individual taxpayer identification number (ITIN).


NCSL: Economic Mobility Enacted Legislation Database

NCCP: Early Childhood Profiles

ZTT: Pathways to Prosperity: Promoting Economic Security for Families with Infants and Toddlers

Institute for Family Studies: Five Pro-Family Priorities for the 118th Congress and Beyond

NCSL: Child Tax Credit Enactments

BPC: State Child Care Tax Supports for Businesses and Parents (search for your state)

State Earned Income Tax Credit

  • Enacting an earned income tax credit (EITC)/working families tax credit at the state level

States can set their own eligibility criteria and credit amounts and can make credit refundable or not.  States can choose to make state EITCs available to immigrant tax filers using ITIN numbers. As New America highlights in the New York case study below, implementation matters.

Many states have state-level EITCs; 23 states offer refundable credits.

Case Study:

New York (from New America)


NCSL: State EITC Enactments (full list of states with state EITCs)

NCCP: Early Childhood Profiles

PN3 Policy Impact Center: State Earned Income Tax Credits

NCSL: Economic Mobility Enacted Legislation Database

Schuyler Center (NY): New York’s Children Are the Heart of Our State – Where Are They in the Final Budget Negotiations?

BPC: State Child Care Tax Supports for Businesses and Parents (search for your state)

State Dependent Care Tax Credit

  • Enacting a dependent care tax credit at the state level

States can set their own eligibility criteria and credit amounts and can make credit refundable or not.

Twenty-five states have a dependent care tax credit for parents, and another four states allow parents a tax deduction for some child care expenses. Fourteen states offer a refundable dependent care tax credit.


NCCP: Early Childhood Profiles

Committee for Economic Development: Child Care State Tax Credits

Brookings Institution: With federal child care legislation abandoned, it’s up to states to help working families

BPC: State Child Care Tax Supports for Businesses and Parents (search for your state)

Tax Credit Outreach

States can reduce barriers to claiming income tax credits by:

  • Supporting free tax preparation through VITA (Volunteer Income Tax Assistance) by providing matched funding and assisting VITA sites with community outreach.
  • Pre-filling and sending tax forms for families likely to be eligible for EITCs, based on wage, withholding, and other tax information from employers.
  • Educating the public through newspapers and social media, on the radio, and by other means.
  • Conducting targeted outreach to families already enrolled in economic security programs like SNAP, Medicaid, and WIC, through notices and reminders and by connecting enrolled families to VITA sites.
  • Requiring employers to share information about the federal and state EITC and CTC with employees through sending or posting notices.
    • States with such requirements for either the federal or state EITC include California, Colorado, Illinois, Louisiana, Maryland, New Jersey, Oregon, Texas, and Virginia.


CBPP: Policy Basics: Earned Income Tax Credits

Young Child Tax Exemption

  • Exempting a portion of income from taxation for families with young children
  • Consolidating young child tax exemptions and converting them to tax credits that reach as many families as possible (more equitable and farther-reaching solution).

Examples: Wisconsin, Michigan, Massachusetts, West Virginia, Maine, and others. Income eligibility, dependent eligibility, and benefit amount vary widely across the states. See Niskanan Center brief linked below for a 50-state map and scroll down on the main page for state-specific briefs.


Niskanan Center: The State of our Families: Child and dependent tax benefits in the states

Property Tax Cuts for Child Care Providers

  • Allowing cities and counties to cut property taxes for child care providers

Example: Texas (more here and here)

Poverty Income Tax Exemption

  • Eliminating personal income tax requirements for single-parent families of three below the federal poverty level

Forty-three states have such an exemption.

Source: NCCP: Early Childhood Profiles

Progressive Tax System

  • Enacting an equity-centered personal income tax code through a system of graduated tax rates that asks more of high-income families


Institute on Taxation and Economic Policy: State Income Taxes and Racial Equity: Narrowing Racial Income and Wealth Gaps with State Personal Income Taxes

Center on Budget and Policy Priorities: States’ Recent Tax-Cut Spree Creates Big Risks for Families and Communities

NCSL: What Happens When States Ditch Income Tax for Sales Tax?

Grocery Tax Reforms

  • Reducing or eliminating sales taxes on groceries, or partially offsetting them with a tax credit

There are 12 states that still have grocery taxes in place for food intended for home consumption.


CBPP: States Can Thoughtfully Implement Grocery Tax Reforms to Help Families and Improve Equity

CBPP: AL and UT Join Growing Number of States Moving to Reduce or Eliminate Sales Tax on Groceries

Owed Child Support Offsets/Deductions

  • Ensuring children receive any child support payments deducted from tax refunds

For families who receive TANF benefits, states can elect to use a tax offset option to give families who are owed child support any child support that the IRS deducts from the non-custodial parent’s tax refund due to past-due child support. If states don’t elect this option, the funds that are deducted are split between the federal and state governments as repayment for previous TANF cash payments paid to the family.

Five states have this policy in place


CBPP: States Should Take Steps Needed to Direct Child Support Payments Deducted From Tax Refunds to Children