This paper analyzes the causal effects of exogenous changes in household income on the home environments of children in single-parent households. I use rich panel data from the Child Development Supplement of the Panel Study of Income Dynamics to construct a measure of warmth and affection in the child’s environment. I use an instrumental variables approach that exploits household-specific expansions of the Earned Income Tax Credit and the Child Tax Credit. I show that exogenous changes in income have a positive effect on children’s emotional environment. I complement this result with evidence of two potential mechanisms: housing conditions and childcare arrangements. I document that changes in income due to changes in the generosity of the tax credit increase the probability of moving in the month following the tax credit payment and that there is an improvement in the crowding and quality of housing. I also find evidence of changes in childcare arrangements, as children spend more time with their fathers and other adults and more time in educational activities. These findings underscore the importance of tax credits in creating healthier home environments for vulnerable families.