A recent change in federal policy offers a promising antidote to the long-running challenge of rural childhood poverty. Starting in July, most households with children began to receive monthly advances on an expanded child tax credit. The expansion was included in the American Rescue Plan passed in March.
Households receive $250 for each child (and $300 for each child younger than 6) per month. The expanded credit phases out once incomes exceed $112,500 for heads of households or $150,000 for married couples.
The Rescue Plan also changed how the tax credit is calculated. Previously, the credit was not available to the lowest earning families. Before the changes, nearly half of children living in rural areas received less than the full credit because their parents earned too little, even as higher earning households received the full credit. This disproportionately affected black and Hispanic households as well.
The Rescue Plan made the credit fully available to these households. Research shows that paying the credit on a monthly basis increases the likelihood that the credit will be spent on household expenses that alleviate the worst symptoms of childhood poverty.
The expanded credit is expected to lift 10 million children out of poverty. With higher levels of childhood poverty, rural communities stand to gain from this change.
However, unless Congress acts again, the expanded credit will expire in 2022, be reduced to the prior amount, and the poorest families would again become ineligible.
Center for Rural Affairs