Enhanced Tax Credit for Child and Dependent Care
This new law increases the tax credit for child and dependent care expenses, meaning families can get more money back for these costs. The credit becomes fully refundable, which benefits even low-income individuals who previously couldn't fully utilize it. The changes aim to provide financial support to families incurring care expenses.
Key points
The maximum amount of expenses eligible for the credit increases from $3,000 to $8,000 for one child and from $6,000 to $16,000 for two or more children.
The credit becomes fully refundable, meaning you can receive money back even if you don't owe enough taxes.
The percentage of expenses that can be claimed increases to 50% for lower-income families, and the income threshold for the credit to begin phasing out rises to $125,000.
An inflation adjustment mechanism is introduced to maintain the credit's value over time.
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