Florida Policy Institute: Thousands of Floridians with Young Children Risk Losing Out on the Child and Dependent Care Tax Credit

https://www.floridapolicy.org/posts/thousands-of-floridians-with-young-children-risk-losing-out-on-the-child-and-dependent-care-tax-credit

As people across the state and nation focus on fiscal stability during what has been an exceedingly difficult couple of years, it is crucial that families are aware of tax credits that can help them provide for their children and keep food on the table.

When it comes to child well-being, Florida — as measured by economic well-being, education, health, and family and community — currently ranks 35th in the nation. The organization that publishes the rankings, KIDS COUNT®, considers 16 indicators, including the share of children in poverty, unemployment rate, and the percentage of low-birthweight babies. Ensuring all families receive the tax credits they are eligible for is a key step toward improving the well-being for Florida’s children, and boosting the state’s KIDS COUNT ranking.

Time is of the essence to spread the word about certain tax credits. A one-year change in tax law due to the American Rescue Plan Act (ARPA) will greatly benefit families who pay out of pocket for child care. However, a large portion of families with low-to-moderate incomes who have never before filed for the Child and Dependent Care Tax Credit (CDCTC) risk losing out on thousands of dollars if community leaders do not raise awareness quickly.

While the large boost in the Child Tax Credit (CTC) in 2021 has grabbed most of the headlines, the expansion in the ARPA of the CDCTC also has potential to broadly reduce barriers to quality, affordable child care and improve the lives of families across our state. Like the CTC, the CDCTC was temporarily expanded and made fully refundable for tax year 2021 in ARPA — this means that families with large out-of-pocket child care expenses and low-to-moderate incomes could receive CDCTCs of up to $4,000, the largest amount for this credit in history by far.

The fact that the CDCTC was made refundable means that the credit will now broadly benefit families with low income for the first time ever. Before the expansion in ARPA, the vast majority of families benefiting from the CDCTC had been those with middle or high incomes. Now, many families with low income straining under the weight of burdensome child care costs will be able to claim the credit for the first time. An estimated 28 percent of the CDCTC disbursed for 2021 will go to families making under $34,800 a year, compared to only 12 percent for previous years. Not only should Congress focus on making the improvements to the CDCTC permanent — they should also prompt community leaders to get the word out that nearly all families paying out of pocket for child care should file for this very valuable tax credit for 2021.

Thankfully, there are simple resources to use to get the word out about the CDCTC. Child care providers, early learning advocates and networks, schools, volunteer tax preparation services, community-based organizations, and policymakers all can utilize the flyer below, which was developed by the Center on Budget and Policy Priorities — Florida Policy Institute’s partner — and the Get It Back campaign to give parents an overview of the tax credits available to them and the increased value they offer for tax year 2021.

KIDS COUNT® is a registered trademark of The Annie E. Casey Foundation in the United States and/or other countries and is used with permission of the Foundation.