Raising children is expensive and the rising cost of diapers, food, housing, and childcare, are making it increasingly difficult for many Kentucky families to make ends meet. 

Access to basic necessities is critical for healthy child development, yet financial stress can strain families’ ability to provide the safe, stable, and supportive environment young children need to grow and thrive. 

One proven tool to help working families stay afloat is the federal Child Tax Credit (CTC). 

The CTC reduces federal income tax liability for families with children and for certain earners provides a refundable credit that helps offset the high costs of raising children. 

Lessons from the Expanded Federal Child Tax Credit

During the COVID-19 pandemic, Congress temporarily expanded the Child Tax Credit through the American Rescue Plan of 2021. The expansion increased the credit to $3,600 per child under the age of 6 and $3,000 per child ages 6 – 17, while extending eligibility to children in very low-income families who had historically been excluded from receiving the full benefit. 

The results were remarkable. The expanded CTC reduced food insecurity and material hardship, reduced racial disparities in child poverty, improved families’ financial stability, and helped parents afford basic needs such as child care, food, and housing. By reaching families with the lowest incomes, child poverty fell to a historic low, lifting nearly 3 million children out of poverty. 

The expanded credit also delivered payments monthly for six months rather than as a single annual refund. These regular payments helped families manage income volatility, a common challenge for low-wage earners, and better plan for ongoing expenses. 

Beyond financial relief, parents reported reduced stress, improved mental well-being, and more time spent with their children. The expansion demonstrated the powerful returns of investing in families, particularly during the critical early childhood years from birth to age six.  

Unfortunately, the expanded Child Tax Credit expired at the end of 2021. As a result, child poverty rates doubled in 2022, erasing much of the progress achieved in 2021. 

State Child Tax Credits

In the absence of a permanent federal expansion, many states have stepped in to support families. Seventeen states, including Georgia, Arizona, and New Mexico, offer their own state-child tax credits to supplement the federal credit. 

Research consistently shows that child tax credits are associated with: 

  • Reduced child poverty
  • Greater household financial stability
  • Improved child and maternal health
  • Better educational outcomes

These policies help families, particularly those with lower incomes, weather unexpected hardship, and build a stronger, more stable foundation for their children. 

A Major Opportunity for Kentucky

Kentucky has a meaningful opportunity to invest in its youngest residents during the 2026 legislative session. Senator Cassie Chambers Armstrong has introduced Senate Bill 81, which would establish a refundable state child tax credit for Kentucky families with children under age six.  

The bill proposes a maximum credit of $1,000 per qualifying child and targets households earning up to $50,000 annually for single taxpayers and $100,000 for married taxpayers, with gradual phase-outs for higher income families. 

This investment would be especially impactful in Kentucky, where one in five children live in poverty. 

Economic instability in early childhood can disrupt healthy brain development and lead to long-term negative outcomes. Research shows that increasing family income during a child’s early years supports better health and educational outcomes and is associated with reduced risk of involvement in the child welfare system. Child tax credits and other policies that strengthen household financial security are also effective strategies for reducing ACEs. 

By adopting a state child tax credit, Kentucky can support working families, reduce child poverty, and ensure more children have the stable foundation they need to thrive. 

Track the progress of SB 81 on the Kentucky General Assembly Bill Tracker.