Major Increase and Refundability for Child and Dependent Care Tax Credit.
This law significantly boosts the Child and Dependent Care Tax Credit by raising the maximum expenses eligible for the credit. Crucially, the credit is made fully refundable for eligible taxpayers, ensuring that low-income families receive the full benefit as a refund, even if they owe little or no federal tax. These changes aim to make childcare more affordable for working families.
Key points
The maximum amount of care expenses eligible for the credit increases from $3,000 to $8,000 (one dependent) or from $6,000 to $16,000 (two or more dependents).
The credit becomes fully refundable, providing direct financial support to low-income families who previously might not have utilized the full credit amount.
More higher-income families will qualify, as the income level where the credit begins to phase out is raised significantly to $125,000.
Credit amounts and income thresholds will be adjusted annually for inflation starting after 2024.
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