Tax provisions for child and dependent care expenses can provide some help to many families struggling to pay for the child care they need to support their children. These tax provisions can reduce the amount of tax owed by families and, in some instances, provide or increase tax refunds.
The federal government and more than half of states have some type of child and dependent care (CADC) tax provision. Every year, NWLC provides an update about legislative changes to CADC provisions; this update covers state changes made in 2017.
Three states have CADC provision changes effective for tax year 2017:
- Colorado did not have enough revenue to continue its refundable Low-Income Child Care Expenses Credit for tax year 2017, so families who were eligible for this tax credit when filing their 2016 taxes will not be able to claim it for expenses incurred in 2017. The credit will be available again for tax years 2018, 2019, and 2020.
- Louisiana amended its dependent care tax credit, adding an expiration date of 2020.
- Minnesota expanded its CADC credit to reach more lower- and middle-class families, increasing the maximum value of the credit and increasing the income level at which the phase out of the credit begins from federal adjusted gross income (AGI) of $25,860 to federal AGI exceeding $50,000.
Three states have CADC provision changes effective for tax year 2018:
- Kansas reinstated a nonrefundable CADC credit that will become effective for tax year 2018.4 Five years ago, Kansas repealed their CADC credit, but some Kansas families will once again receive some tax benefits based on their child care expenses in 2018.
- New York increased the value of its CADC credit for middle-class families with New York AGI between $50,000 and $150,000, and increased the value for larger families.
- Oregon expanded access to the Working Family Household and Dependent Care credit, which was enacted in 2016, to unmarried taxpayers seeking employment or attending school