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State child care tax supports for businesses and parents

Description:

While federal tax credits are top of mind for taxpayers, states have their own tax code and can implement tax policies that meet the needs of working parents living in their state. State tax policy can play a powerful role in increasing access to affordable, quality child care. In a scan of all 50 states and the District of Columbia, BPC researched which states offer tax credits in these categories: 1. Child and Dependent Care Tax Credit (CDCTC): Credit to offset the cost of child care based on the amount of eligible expenses a parent incurs; 2. Child Tax Credit (CTC): Credit for parents with young children, typically based on income and number of children; 3. Earned Income Tax Credit (EITC): Credit for low-income workers, with an enhanced credit for workers with young children; 4. Employer-Provided Child Care Tax Credit (45F): Credit for employers to offset the cost of providing or subsidizing child care for their employees. Many state tax supports mirror their federal counterparts, although there are often variations in the specific provisions (i.e., eligibility, credit rate, credit maximum). Three in four states (78%) have implemented their own version of at least one of these four credits to provide relief to working parents on their state tax returns. Four states have all four credits, 13 have none, but most fall somewhere in the middle. The EITC (32) and CDCTC (28) are the most common state tax credits. Three states have pending legislation for FY24 to implement at least one of these tax credits. Below is a tool showing the landscape of state tax policies for CDCTC, CTC, EITC and 45F. (author abstract)

Resource Type:
Interactive Tools
Publisher(s):
Country:
United States

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