Major tax credit increase for child and dependent care expenses
This Act significantly enhances the Child and Dependent Care Tax Credit by raising the maximum amount of expenses eligible for the credit. The goal is to reduce care costs for families, particularly those with low and middle incomes, by making the credit fully refundable for certain taxpayers. The income thresholds for phasing out the credit are also increased and will be adjusted annually for inflation.
Key points
The maximum amount of expenses eligible for the credit increases from $3,000 to $8,000 (for one qualifying individual) and from $6,000 to $16,000 (for two or more individuals).
The credit is made fully refundable for certain taxpayers, meaning they can receive the money back even if they owe no taxes.
The income threshold at which the credit begins to phase out is increased to $125,000, allowing more higher-income families to benefit from a larger credit.
Annual inflation adjustments are introduced for income thresholds and maximum expense amounts to prevent the credit's value from eroding over time.
The changes apply to taxable years beginning after December 31, 2023.
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