Pa. has a new child care tax credit. Here’s what you need to know

An empty classroom.

Modeled off of the federal Child Tax Credit, the Child and Dependent Care Enhancement Program will return up to 30% of child care-related expenses that filers claim on their federal return. (Thomas Hengge/Philadelphia Inquirer)

This story originally appeared on Spotlight PA.

Gov. Tom Wolf has approved a new, permanent child care tax credit that will allow families to claim thousands of dollars in benefits.

The new tax credit was created as part of Pennsylvania’s new $45.2 billion budget, which Wolf signed into law in early July.

Wolf and lawmakers also allocated over $140 million to a one-time expansion of a property tax credit for low-income and older Pennsylvanians. Here’s what you need to know about these credits and how you can access them:

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The Pennsylvania child care tax credit

What does it do? Modeled off of the federal Child Tax Credit, the Child and Dependent Care Enhancement Program will return up to 30% of child care-related expenses that filers claim on their federal return. This program is meant to support working families by lessening their tax liability. A total of $24.6 million went into the program, which is now a permanent fixture of the state’s tax code.

Who is eligible? People who have one or more dependents and fall under a certain income level are eligible. For people who care for one dependent, expenses claimed cannot surpass $3,000. For those with two or more dependents, it cannot surpass $6,000.

The percentage of expenses that can be credited will vary depending on income level, but that detail has yet to be determined. Per a state House budget committee representative, the rules will be similar to those for federal returns.

Married couples with up to $150,000 in annual income or a single filer who made half that were eligible for the full amount of the federal tax credit in 2021.

How is it claimed? This credit can be claimed when filing state taxes beginning in 2023. The rebate will be subtracted from the total amount of taxes owed to the state. If the amount credited is worth more than the amount of taxes owed to the state, the rebate will be refunded to the filer.

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The (temporary) boost for property tax relief

What does it do? This one-time allocation temporarily boosts the state’s Property Tax/Rent Rebate Program.

Under the current program, eligible Pennsylvanians receive rebates ranging from $650 to $975 depending on whether the filer is a renter or homeowner.

The year’s budget uses $140 million in federal stimulus money to expand payments for one year by 70%. If a person already received $975 from the program last year, they will get an additional $682.50.

Who is eligible? The program benefits Pennsylvanians 65 or older, widowed people older than 49, and people with disabilities age 18 and older. Homeowners with annual incomes under $35,000 are eligible, as are renters with annual incomes under $15,000 (certain types of income are excluded).

How is it claimed? Anyone who received a property tax or rent rebate during the 2021 tax season is automatically eligible for the additional rebate. Pennsylvanians can still apply for the 2021 rebate program and obtain the 70% bonus rebate until the end of this year. However, the bonus rebate will not be available for those applying to next year’s rebate program.

Spotlight PA logoSpotlight PA is an independent, non-partisan newsroom powered by The Philadelphia Inquirer in partnership with PennLive/The Patriot-News, TribLIVE/Pittsburgh Tribune-Review, and WITF Public Media.

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