Graph shows percentage of tax filers who claimed the Earned Income Tax Credit in 2018 by county type.
A Daily Yonder analysis shows that in 2018 under the pre-stimulus rules, a greater percentage of rural tax filers claimed the Earned Income Tax Credit than cities. Suburban filers were least likely to claim EITC. New rules this year will make more families eligible for the program. (Daily Yonder/IRS data)

Two poverty-reduction programs that are part of the Biden administration’s March stimulus package will have a disproportionately large impact on rural families, according to policy advocates who want the temporary measures to be extended.

The American Rescue Plan expanded the Child Tax Credit, which ranges from $3,000 to $3,600 per child, to most families. Before the expansion, nearly half of rural children did not receive the full tax credit benefit because their parents earned too little to qualify. 

The rescue plan also enlarged the Earned Income Tax Credit by expanding age eligibility and increasing the maximum benefit for workers without dependent children from $543 to $1,502. It also raised the income cap from $16,000 to $21,000 for workers without dependent children.

The changes in both programs are set to expire in one year. As part of a second stimulus package, the American Family Plan, the Biden administration has proposed extending the child-tax credit expansion through 2025 and making changes to the Earned Income Tax Credit (EITC) permanent. 

Because eligibility for the Child Tax Credit and EITC is dependent on the same income limits no matter where you are in the country, people in rural areas—which tend to have lower wages and incomes on average—are more likely to see their tax benefits increase under the changes, said Jess Carson, research assistant professor at the Carsey School of Public Policy at the University of New Hampshire.

Ninety-four percent of rural children will qualify for the Child Tax Credit, versus 89% of children in metropolitan counties, according to Ellen Nissenbaum, senior vice president for government affairs at the Center for Budget and Policy Priorities (CBPP). The Earned Income Tax Credit expansion will affect 21% of workers without children in rural areas, versus 17% in metropolitan areas. 

In this April 28, 2021, photo, President Joe Biden speaks to a joint session of Congress in the House Chamber at the U.S. Capitol in Washington. (AP Photo/Andrew Harnik, Pool)

In the past, families that didn’t earn an income couldn’t get the child tax credit. Families with the lowest earnings benefited the least from the program. In March, the American Rescue Plan changed that, removing the requirement that families meet an income threshold and increasing the maximum tax credit from $2,000 to $3,000 for children ages 6-17, and $3,600 for children under 6.

A single mother of one toddler and one second grader who earns $10,000 a year will receive $6,600 from the tax credit under the 2021 rules, a $5,475 increase, according to a CBPP estimate.

In his April 28 speech to Congress, President Joe Biden said changes in the tax credit “will help more than 65 million children and help cut child care poverty in half.” 

Prior to the 2021 expansion, the families of about 4.3 million rural children got less than the full child tax credit because parents earned too little to qualify, according to Kris Cox, deputy director of federal tax policy at CBPP. 

At least 9,315,000 children in rural areas will benefit from the expanded tax credit.

For adults without dependent children, the American Rescue Plan removed the EITC’s age limit, making it newly available to those 65 and up. Expanded eligibility for older Americans will have an outsized benefit for rural America because nonmetro populations tend to skew older, said Carson at the University of New Hampshire. 

In addition, the maximum refund available to childless adults was upped by nearly $1,000, to $1,502. Before this change, low-income people not raising children were often taxed into poverty, said Nissenbaum.

The EITC expansion will mean increased benefits for at least 2,653,000 rural workers without dependent children. 

“So, moving forward, what does the American Rescue Plan do?” asked Nissenbaum.  “They made a change which is really historic, it’s really transformational, but it’s only for a year, and that, of course we cannot let stand.”

Unlike the EITC expansion, the Biden administration has only proposed extending the child tax credit changes through 2025.

In 2021, one major challenge is ensuring that everyone who is eligible for the expanded tax credits will receive them. 

When it comes to families with very little or no income, those who are not required to file taxes and would not have been eligible for the CTC in the past, Carson said community outreach programs are often tasked with making them aware of potential benefits. 

“Anytime we’re doing something that requires people to file taxes, I think it needs to be paired with a lot of outreach and education so that people understand why they need to file taxes [this year] when they don’t usually, and what they could get from it, and how to do it,” she said. 

The Get It Back Campaign, a project of CBPP, has resources for lower and moderate-income workers seeking tax assistance, as well as those interested in increasing accessibility in hard-to-reach communities. Specific outreach advice for rural communities is available here

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