Reforming the Child and Dependent Care Tax Credit
Publication Date: June 2007
Publisher(s): Tax Policy Center
Author(s): Jeff Rohaly
Special Collection: John D. and Catherine T. MacArthur Foundation
Keywords: Economy; Federal Budgets & Fiscal Policy; Income and Wealth Distribution; Tax Policy
The child and dependent care tax credit (CDCTC) is a nonrefundable tax credit designed to help offset the expenses of providing care for children under the age of 13 or disabled dependents as long as a parent or caretaker is working or searching for work. In theory, a low-income family can qualify for a maximum $2,100 credit. The credit is not refundable, however, and families with low incomes generally owe little or no income tax. Thus, the theoretical maximum rarely applies in practice. This paper examines the revenue and distributional implications of making the CDCTC fully refundable.