Research by Author & Topic

Publications by Elaine Maag on Child Care and Development

Low-income working families face enormous challenges. Key among them is how to pay for decent child care. The federal income tax code subsidizes child care in several ways. The largest subsidy is the Child and Dependent Care Tax Credit (CDCTC), a nonrefundable tax credit that offsets up to 35 percent of working parents' child care costs, subject to limits. Though not earmarked specifically for child care, the refundable Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) provide more help to low-income working families. This paper considers options to reform the CDCTC to assist low-income families, and examines expansions to the refundable tax credits that help families with children.

Child care's costs can be too high for low-income working families. As of 2004, along with a federal credit for child care expenses, 27 states offered tax credits or deductions to offset these expenses. Thirteen states offered a refundable child care credit—at least for low-income families; twelve states, care credits that were non-refundable; and three states, a deduction of child care expenses (Maryland offered both a non-refundable credit and a deduction).

Low-income working families face enormous challenges. Key among them is how to pay for decent child care. The largest federal subsidy is the Child and Dependent Care Tax Credit (CDCTC), a nonrefundable tax credit that offsets up to 35 percent of working parents' child care costs, subject to limits. Though not earmarked specifically for child care, the refundable Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) provide more help to low-income working families. This paper considers options to reform the CDCTC to assist low-income families. Expansions to the refundable tax credits that help families with children are also analyzed.