What Is The Child Care Expansion Tax Credit?

The Child and Dependent Care Tax Credit (CDCTC) is a tax credit that can partially offset working families’ child care expenses. It allows taxpayers to claim the credit on behalf of eligible children and other dependents, reducing their tax liability and potentially resulting in a tax refund. The American Rescue Plan Act increases the child tax credit to $3,000 or $3,600 per qualifying child and allows advance payments in 2021.

Vice President Kamala Harris has proposed a $6,000 tax credit for parents of newborns and bringing back the pandemic-era $3,600 Child Tax Credit for all eligible individuals. The American Rescue Plan Act also increases the child tax credit to $3,000 or $3,600 per qualifying child and allows advance payments in 2021.

The expansion of the CDCTC could benefit millions of low-income children, with the average amount of money parents received during the temporary expansion up $1,548 from the previous year. The CDCTC currently provides up to $2,000 per child to about 40 million families every year.

The federal child tax credit (CTC) allows eligible parents and caregivers to reduce their tax liability and might result in a tax refund. In the first year, the family’s Child Tax Credit would increase by $1,725, from $1,875 to $3,600. Half of the roughly 16 million children who qualify for the CDCTC are low-income. The federal government and 15 states have child tax credits, intended to provide financial relief for low-income parents and their children.