Child poverty in 2021 fell to 5.2%, the lowest rate on record according to Census Bureau measures.1 The child poverty rate was cut almost in half from the previous year’s rate of 9.7%. This drop was the largest single-year decline in child poverty on record and was driven primarily by the expanded Child Tax Credit (CTC) included in the American Rescue Plan.
Overall, the CTC lifted 5.3 million people—including 2.9 million children—out of poverty in 2021. Just the expansion of the CTC alone lifted 2.1 million children out of poverty, and were the tax credit not expanded, the child poverty rate would have only fallen to 8.1% and these 2.1 million children would have remained in poverty. The CTC also helped reduce the percentage of children living in near-poverty by one-third.
The expansion of the CTC as part of the American Rescue Plan made the credit fully refundable, which enabled previously ineligible low-income families to receive the full credit. Full refundability was the main driver of the expanded CTC’s child poverty reduction and helped 19 million more children—including 45% of Black children and 39% of Hispanic children—become eligible for the full credit. These children previously could not receive the full credit or received no credit at all because their families' incomes were too low. According to a Center on Budget and Policy Priorities model, making the credit fully refundable accounted for 80% of the reduction in child poverty.
The American Rescue Plan also dramatically increased the value of the CTC from $2,000 per child to up to $3,600 per child under age 6 and to $3,000 per child between age 6 and 17 in 2021. This increase put significantly more money in the pockets of low- and middle-income families to pay for household expenses. Half of the CTC was distributed in advance via monthly payments from July through December 2021, which helped families meet their financial needs in real time. Over 36 million families with more than 61 million children received monthly payments in 2021, and qualifying families received the remainder of the credit when they filed their 2021 taxes.