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Child Care Tax Credits
A child tax credit is intended for people who are financially supporting—you guessed it—a child. For 2023, the credit is worth up to $2000 per child.
To qualify, a child must be under age 17 at the end of the year; have a Social Security number; be your child, stepchild, foster child, sibling, or descendant; live with you for more than half of the year; be claimed as your dependent; and pay for no more than half of their own expenses. You’ll also have to satisfy income requirements.
You may remember that in 2021, the pandemic-era American Rescue Plan Act expanded the child tax credit to $3000 per child between 6 and 17 years old and $3600 per child under 6. It made the child tax credit fully refundable and allowed taxpayers to get half of the money in advance monthly payments. This provision expired at the end of 2021, and though several legislators have taken steps to revive it, Congress has not revived the expanded child tax credit.
Today, the child tax credit has a refundable and nonrefundable portion. For 2023, the refundable part is worth up to $1500; it’s called the additional child tax credit.
Child and Dependent Care Credit
A separate credit from the child tax credit, this is intended for taxpayers who paid care expenses for another person while they worked or looked for work. To qualify, that person must be under age 13; a spouse who’s unable to care for themselves and lives with you at least half of the year, or someone who’s unable to care for themselves, lives with you at least half the year and is (or would typically be) your dependent.
The child and dependent care credit covers 20% to 35% of your work-related expenses, depending on your income, up to a maximum of $3000 for one person ($6000 for two or more people).
Earned Income Tax Credit
The earned income tax credit, or EITC, is intended for workers with low to moderate incomes. To qualify for tax year 2023, you must have a Social Security number, be a citizen or resident alien, have a certain amount of earned income, not have foreign income, and have less than $11,000 in investment income.
How much your EITC is depends on how many eligible children you have (the more kids/relatives you claim, the higher your income and credit can be). For 2023, the maximum EITC without kids is $600. With one child, it’s $3995; with two, it’s $6604. For three or more children, it’s $7430.
Keep in mind that if you claim the EITC or additional child tax credit (mentioned above), the IRS is legally obligated to hold onto your tax refund until mid-February.
Child Care Subsidy Programs
If your family needs help with tuition, there are state and local agencies to provide tuition subsidies. This map is a great starting point for finding the financial assistance resources available.
Child Care as an Employment Benefit
More and more employers add childcare benefits to their employee compensation packages because it’s hard to do your job without reliable childcare!
Talk with your employer or your HR department about whether they offer childcare benefits and how to use them.
