Tax Subsidies to Help Low-Income Families Pay for Child Care

Brief

Tax Subsidies to Help Low-Income Families Pay for Child Care

Abstract

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.

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