A new Senate bill could give parents a substantial tax credit for child care

Sen. Bob Casey, Jr., D-Pa., arrives to chair the Senate Special Aging Committee hearing on "Assisted Living Facilities: Understanding Long-Term Care Options for Older Adults" on Thursday, January 25, 2024.

A bill was introduced in the Senate on Jan. 24 that could give parents significant help with child care costs, the Philadelphia Inquirer reported.

Co-sponsored and co-written by Pennsylvania Democratic Sen. Bob Casey, the Child and Dependent Care Tax Credit Enhancement Act of 2024 would amend the Internal Revenue Code and increase the amount of tax credit parents can receive for what they spend on day care, summer camps, after-school programs, and babysitting.

According to the Department of Labor’s National Database of Childcare Prices, the median annual price for child care in 2018 for one child ranged from $4,810 to $15,417; with an adjustment for inflation, that number in 2022 was between $5,357 and $17,171.

Different from the child tax credit expansion legislation currently being negotiated in Congress, a bipartisan proposal that would raise the child tax relief incrementally over three years, this bill focuses simply on expenses for child care and care for a dependent person and returns the tax credit back to amounts in effect in 2021.

The Child and Dependent Care Tax Credit Enhancement Act was enacted as part of the American Rescue Plan in 2021. According to a press release about the 2024 bill issued by Casey’s office, the 2021 law “nearly quadrupled the average CDCTC credit per family from $593 to $2,158 while allowing the working poor to claim the credit for the first time by making the credit refundable.”

“Child care costs were too high for too many families well before the pandemic, and that problem isn’t going away unless we take action to lower costs. It’s long past time to step up and make the child care tax credit available to everyone at the actual cost of child care today,” Casey said, according to the Inquirer.

The new bill offers an increase of the maximum credit to $4,000 per child, allowing families to receive up to $8,000 in tax credits. 

The new bill also eliminates the tax credit for families that make over $400,000 per year. 

According to a 2023 report from the Annie E. Casey Foundation’s Kids Count, child care costs have risen by 220% in the last 30 years.  

In December 2023, Gov. Josh Shapiro passed legislation in Pennsylvania that increased the match of state to federal tax credits from 30% to 100% after the 2021 federal tax expansion ended.

“It’s long past time to step up and make the child care tax credit available to everyone at the actual cost of child care today,” Casey said.