Child and Dependent Care Tax Credit Overview

Fiscal Human Services

Key Takeaways

The federal government and 26 states plus D.C. offer Child and Dependent Care Tax Credits (CDCTCs) to help families offset the rising costs of child and dependent care services,
State CDCTCs differ in credit amounts (ranging from 7% to over 100% of the federal credit), refundability, income-based scaling, and whether they target child care, eldercare, or both.
When enacting CDCTCs, policymakers should consider eligibility criteria, ease of administration, credit amounts and refundability, and whether to target specific expenses to effectively support families in need.

Recognizing that millions of working American families incur expenses for care services, the federal government and 26 states plus the District of Columbia offer child and dependent tax credits (CDCTCs) to help offset those costs.

This tax credit benefits families by decreasing their tax liability for expenses related to child or dependent care. In general, CDCTCs are associated with marginal increases in center-based child care and maternal employment levels. The federal government and states utilize CDCTCs—in combination with earned income tax credits and child tax credits—to help working families retain more of their income and offset child care and eldercare costs. This policy brief provides an overview of the federal and state CDCTCs currently enacted and offers some state policy considerations for those considering enacting their own CDCTC.

The Federal CDCTC

The federal CDCTC defrays taxpayer’s expenses related to child and dependent care services, which allow the taxpayer to work instead of providing care themselves. Taxpayers may claim this credit for expenses made on behalf of qualifying individuals:

Children under the age of 13 claimed as a dependent by the taxpayer.
Disabled spouses who are physically or mentally unable to take care of themselves who live with the taxpayer for more than half the year.
Any disabled person who is physically or mentally unable to take care of themselves who lives with the taxpayer for more than half the year. However, the disabled person cannot file a joint return with another taxpayer and the disabled person’s gross income must be less than $4,700.

The credit is calculated as a percentage of qualified expenses, such as household services (e.g., employing a household maid, babysitter or cleaning person) and care services (e.g., child care, eldercare, day camp). The credit is calculated as a percentage of qualified expenses, with the percentage and maximum and expense limits determined by the taxpayer’s income. Taxpayers may claim up to 35% (available for those with incomes between $0-$15,000) of expenses up to $3,000 dollars for one qualifying individual or $6,000 for two or more qualifying individuals, with the credit amount gradually declining to 20% for those with incomes above $43,000.

The federal CDCTC is a nonrefundable tax credit, meaning it can reduce tax liability but cannot result in a refund for taxpayers with little or no tax liability. Congress temporarily expanded the federal CDCTC in 2021, making it refundable, increasing the cap on expenses taxpayers may claim, increasing the credit rate and making it available to more income brackets.

State CDCTCs

According to NCSL research, at least 26 states and the District of Columbia supplement the federal credit with their own CDCTC. In addition, Idaho and Virginia offer tax deductions for child and dependent care expenses instead of credits, meaning taxpayers may deduct expenses from their incomes before computing tax liability. Although Missouri does not have an equivalent state CDCTC, it does provide a state tax credit up to $500 for eldercare expenses. For states with CDCTC equivalents, there are some significant ways in which state CDCTC policies can differ from one another.

Credit amount: Many states base their credit amounts on a percentage of the federal credit, although some provide a flat amount per dependent a taxpayer claims. For states that base their credit amount on a percentage of the federal credit, amounts can range from 7% to 100% or more.
Refundability: Unlike the federal CDCTC, 15 states and the District of Columbia make their CDCTCs refundable. Often, states will condition refundability on the taxpayer’s income level (usually targeting those with lower incomes) or make certain expenses refundable.
Income-based scaling: As the chart below shows, a fair number of states adjust credit amounts based on a taxpayer’s income, phasing out credits as income rises. In addition, some states may offer taxpayers in higher income tax brackets more generous state credits in recognition of the local cost of living compared with federal income requirements.
Targeted incentives: Certain states may only allow taxpayers to claim expenses for child care or eldercare, not both. In contrast with the federal policy that recognizes both types of expenses, states may designate only certain types of qualifying expenses to control the cost of the tax expenditure, provide a more generous benefit for specified costs, or provide an alternative tax incentive related to the omitted costs.

50-State Comparison of State CDCTC
State	Does the State Have A Child and Dependent Care Tax Credit?	Description	Percentage of Federal Credit or Credit Amount	Expenses Allowed to Claim Credit	Is the Credit(s) Refundable?	Citation
Arkansas	Yes	Arkansas has the Household and Dependent Care Services Tax Credit, which is technically two tax credits: one refundable and one nonrefundable. The refundable credit is only applicable to child care expenses.	20%	Child and dependent care expenses as outlined by I.R.C. § 21.	It depends. 20% of the federal credit granted for child care expenses only is refundable. Other dependent care expenses	Ark. Code Ann. § 26-51-502.
California	Yes	California offers a child and dependent care similar to the federal credit, with the amount of credit contingent upon a taxpayer's income.	Percentage of federal credit depends on income.- $40,000 or less: 50%- Over $40,000 but not over $70,000: 43%- Over $70,000 but not over $100,000: 34%- Over $100,000: 0%	Child and dependent care expenses as outlined by I.R.C. § 21.	No	Cal. Rev. & Tax. Code § 17052.6
Colorado	Yes	Colorado provides two tax credits: a child and dependent care credit and a low-income child care credit.	The Colorado child and dependent care credit is available to those with incomes less than or equal to $60,000. The percentage of federal credit granted amounts are the following:- 50% for tax years before 2026- 70% for tax years after 2026, adjusted for inflation beginning in 2027The low-income child care tax credit is available for those with incomes less than $25,000 and equals 25% of a taxpayer's child care expenses, with a maximum of $500 for one or $1,000 for two or more dependents.	Colorado child and dependent care credit: Child and dependent care expenses as outlined by I.R.C. § 21. Low-income child care credit: Child care expenses.	Yes. Both credits are refundable.	Colo. Rev. Stat. § 39-22-119Colo. Rev. Stat. § 39-22-119.5
Delaware	Yes	Delaware has the child care and dependent care expense credit.	50%	Child and dependent care expenses as outlined by I.R.C. § 21.	No	Del. Code Ann. tit. 30, § 1114
District of Columbia	Yes	D.C. has a child and dependent care credit and the Keep child care affordable credit.	D.C. child and dependent care credit: 32%Keep child care affordable credit: Lesser of total amount of child care expenses or $1000 per eligible child as of 2019 adjusted for inflation annually since. Only available to those with incomes below $150,000 for those filing single head of household or married filing jointly or $75,000 for married filing separately.	Child and dependent care credit: Child and dependent care expenses as outlined by I.R.C. § 21. Keep child care affordable credit: Child care expenses.	Child and dependent care credit: No.Keep child care affordable credit: Yes.	D.C. Code Ann. § 47-1806.04(c)D.C. Code § 47-1806.15
Georgia	Yes	Georgia has two credits: Child and dependent care credit and the Qualified caregiving expense credit that is available for care expenses for family members 62 and older.	Georgia child and dependent care credit: 30% of federal credit.Qualified caregiving expense credit: 10% if caregiving expenses or $150, whichever is less.	Child and dependent care credit: Child and dependent care expenses as outlined by I.R.C. § 21. Qualified caregiving expense credit: care expenses for elder family member.	Child and dependent care credit: No.Qualified caregiving expense credit: No.	Ga. Code Ann. § 48-7-29.10Ga. Code Ann. § 48-7-29.2
Hawaii	Yes	Hawaii offers a refundable tax credit for child and dependent care expenses similar to the federal credit. The credit amount is based on the taxpayer's income and the expenses must be necessary for gainful employment.	Percentage of expenses allowed to be claimed as a credit depends on income.- $25,000 or less: 25%- Over $25,000 but not over $30,000: 24%- Over $30,000 but not over $35,000: 23%- Over $35,000 but not over $40,000: 22%- Over $40,000 but not over $45,000: 21%- Over $45,000 but not over $50,000: 20%- Over $50,000: 15%"	Child and dependent care expenses as defined under Hawaii law.	Yes.	Haw. Rev. Stat. § 235-55.6
Idaho	No. However, the state offers a deduction.	Idaho allows taxpayers to claim a deduction for expenses related to child and dependent care.	Deduction up to $12,000 annually.	Child and dependent care expenses as outlined by I.R.C. § 21.	No	Idaho Code Ann. § 63-3022D
Iowa	Yes	Iowa offers a refundable child and dependent care credit based on a percentage of the federal credit. Iowa also provides an early childhood development tax credit for qualifying expenses related to dependents aged 3 to 5.	Percentage of federal credit depends on income.- Less than $10,000: 75%- $10,000 to less than $20,000: 65%- $20,000 to less than $25,000: 55%- $25,000 to less than $35,000: 50%- $35,000 to less than $40,000: 40%- $40,000 to less than $90,000: 30%- $90,000 or more: 0%For early childhood development expenses, a credit of 25% of the first $1,000 paid per child (age 3-5) is available.	Child and dependent care credit: Child and dependent care expenses as outlined by I.R.C. § 21. Early childhood development credit: Preschool services, educational materials, and qualifying developmental activities for dependents aged 3 through 5 (excluding religious instruction) as defined by Iowa Code § 237A.	Yes	Iowa Code Ann. § 422.12C(1)
Kansas	Yes	Kansas offers a non-refundable child and dependent care tax credit based on a percentage of the federal credit.	Tax year 2024 and beyond: 50% of the federal credit.	Child and dependent care credit: Child and dependent care expenses as outlined by I.R.C. § 21.	No	Kan. Stat. Ann. § 79-32,111c
Kentucky	Yes	Kentucky has a non-refundable child and dependent care tax credit based on a percentage of the federal credit.	20%	Child and dependent care credit: Child and dependent care expenses as outlined by I.R.C. § 21.	No	Ky. Rev. Stat. Ann § 141.067
Louisiana	Yes	Louisiana offers a refundable or non-refundable credit based on a percentage of the federal credit, depending on the taxpayer's income.	Percentage of federal credit dependent on income.- $25,000 or less: 50% of federal credit (refundable)- Over $25,000 to $35,000: 30% of federal credit.- Over $35,000 to $60,000: 10% of federal credit.- Over $60,000: 10% of federal credit.	Child and dependent care expenses as defined by I.R.C. § 21.	Partially, depending on income.	La. Rev. Stat. Ann. § 47:297.4
Maine	Yes	Maine offers a credit equal to a percentage of the federal child and dependent care credit, with enhancements for quality child care expenses. The credit is refundable for certain low-income taxpayers.	25% of federal credit50% of federal credit if expenses are for quality child care services	Child and dependent care expenses as defined by I.R.C. § 21.	Partially, depending on income (taxpayers with Maine adjusted gross income of $35,000 or less).	Me. Rev. Stat. Ann. tit. 36, § 5218
Maryland	Yes	Maryland provides a non-refundable credit based on a percentage of the federal credit for taxpayers below certain income thresholds.	Percentage of federal credit depends on income and filing status.For Individuals:- Income up to $50,000: 32% of federal credit (refundable)- Income over $30,000 to $92,000: Credit decreases by 1% for every $2,000 (or fraction thereof) over $30,000. Credit phases out completely at $92,000.For Married Filing Jointly:- Income up to $75,000: 32% of federal credit (refundable)- Income over $50,000 to $143,000: Credit decreases by 1% for every $3,000 (or fraction thereof) over $50,000. Credit phases out completely at $143,000 AGI.	Child and dependent care expenses as defined by I.R.C. § 21.	Partially, depends on income.	Md. Code Ann., Tax-Gen. § 10-716
Minnesota	Yes	Minnesota offers a refundable credit based on the federal child and dependent care credit, with modifications. The credit amount decreases as income increases and is phased out after a certain income level.	Percentage of federal credit depends on income and filing status. Income up to $52,230.- 100% of the federal child and dependent care credit (refundable).Income over $52,230.For one qualifying individual:- Credit is $600 minus 5% of income over $52,230.For two or more qualifying individuals:- Credit is $1,200 minus 5% of income over $52,230.	Child and dependent care expenses as defined by I.R.C. § 21.	Yes	Minn. Stat. § 290.067.
Missouri	No. However, the state offers a tax credit for elder care specifically.	Missouri has the shared care tax credit to help defray the costs of taking care of an elderly relative.	Up to $500	Expenses associated with care for an elderly person, aged 60 or older, as defined by Missouri law.	No	Mo. Rev. Stat. § 192.2015
Nebraska	Yes	Nebraska provides a refundable credit for taxpayers with an adjusted gross income of $29,000 or less and a non-refundable credit for those with higher incomes, based on a percentage of the federal credit.	Percentage of federal credit depends on income.- $29,000 or less: 100% of federal credit (refundable)- Over $29,000 to $59,000: 25% of federal credit (non-refundable)- Over $59,000: 0%	Child and dependent care expenses as defined by I.R.C. § 21.	Partially, depends on income.	Neb. Rev. Stat. § 77-2715.07(2)(a) and (b)
New Jersey	Yes	New Jersey offers a refundable child and dependent care tax credit based on a percentage of the federal credit.	Percentage of federal credit depends on income. - Income not over $30,000: 50% of federal credit- Over $30,000 but not over $60,000: 40% of federal credit- Over $60,000 but not over $90,000: 30% of federal credit- Over $90,000 but not over $120,000: 20% of federal credit- Over $120,000 but not over $150,000: 10% of federal credit	Child and dependent care expenses as defined by I.R.C. § 21.	Yes	N.J. Stat. Ann. § 54A:4-17
New Mexico	Yes	New Mexico offers a refundable tax credit for child day care expenses paid to a caregiver in New Mexico for qualifying dependents. The credit is designed to assist residents who incur child care expenses necessary to enable gainful employment, provided they meet certain income and eligibility requirements.	Credit is based on a percentage of federal credit with several stipulations. - Credit Amount: 40% of actual compensation paid to a caregiver. sad- Maximum Credit per Dependent: Up to $480 per qualifying dependent.- Maximum Total Credit: Up to $1,200 per taxable year for all qualifying dependents.- Limit on Daily Expenses: Actual compensation considered for the credit cannot exceed $8.00 per day per qualifying dependent.	Compensation paid to a caregiver for child day care services provided to qualifying dependents under the age of 15, necessary to enable the taxpayer (and spouse, if applicable) to be gainfully employed.	Yes	N.M. Stat. Ann. § 7-2-18.1.
New York	Yes	New York provides a refundable child and dependent care tax credit based on a percentage of the federal credit allowed under I.R.C. § 21. The applicable percentage varies depending on the taxpayer's income and can exceed 100% of the federal credit for lower-income taxpayers.	Percentage of federal credit depends on income. - Income up to $25,000: 110% of federal credit- Income over $25,000 up to $40,000: Credit percentage decreases from 110% to 100% as income approaches $40,000- Income over $40,000 up to $50,000: 100% of federal credit- Income over $50,000 up to $55,000: Multiply federal credit by 1.1682- Income over $55,000 up to $60,000: Multiply federal credit by 1.2733- Income over $60,000 up to $65,000: Multiply federal credit by 2.322- Income over $65,000 up to $150,000: Multiply federal credit by 3.000 (effectively 60% of federal credit)Income over $150,000: Not eligible for the creditNew York allows higher dollar limits than the federal credit for taxpayers with more than two qualifying individuals:$7,500 if there are three qualifying individuals$8,500 if there are four qualifying individuals$9,000 if there are five or more qualifying individuals	Child and dependent care expenses as defined by I.R.C. § 21.	Yes	N.Y. Tax Law § 606(c).
Ohio	Yes	Ohio provides a non-refundable credit based on a percentage of the federal credit for taxpayers with Ohio adjusted gross income below certain thresholds.	Percentage of federal credit depends on income. - Income less than $20,000: 100% of federal credit- Income $20,000 to less than $40,000: 25% of federal credit- Income $40,000 or more: 0%	Child and dependent care expenses as defined by I.R.C. § 21.	No	Ohio Rev. Code Ann. § 5747.054
Oklahoma	Yes	Oklahoma offers a non-refundable credit equal to a percentage of the federal child care credit, depending on the taxpayer's income. This credit is compared with the financial benefit of the state's child tax credit, and state law requires a taxpayer to tax whichever credit offers greater benefit. In addition, the state provides a family caregiver credit for expenses associated with eldercare.	Child care credit: 20% for taxpayers with incomes less than $100,000.Family caregiver credit: The credit is only available to those with incomes less than $50,000 if filing individually or $100,000 if filing jointly as a married couple for expenses associated with family caregiving. The state provides a credit equal to 50% for eligible expenses, with a maximum credit of $2,000 or $3,000 for care expenses on behalf of an individual who was a veteran or diagnosed with dementia.	Child care credit: Child care expenses as defined by Oklahoma law. Family caregiver credit: Eldercare expenses as defined by Oklahoma law.	Child care credit: NoFamily caregiver credit: No	Okla. Stat. Ann. tit. 68, § 2357(B)(2)Okla. Stat. Ann. tit. 68, § 2357.801
Oregon	Yes	Oregon offers a refundable credit based on the federal credit. In addition, the state provides a credit for expenses in lieu of nursing home care.	Child and dependent care credit: Percentage of federal credit depends on taxpayer's income, claimed dependent's age and/or disability level, ranging from 8 - 70%. Credit in lieu of nursing home credit: $250 or 8% of expenses, whichever is less.	Child and dependent care credit: Child and dependent care expenses as defined by I.R.C. § 21.Credit in lieu of nursing home credit: Expenses made in order to prevent an individual from being placed in nursing home unnecessarily.	Yes	Or. Rev. Stat. Ann. § 315.264Or. Rev. Stat. Ann. § 315.147 et seq.
Pennsylvania	Yes	Pennsylvania provides a child and dependent care credit based off of the federal tax credit.	100% of the federal credit up to $3,000 for one qualifying dependent or $6,000 for two or more dependents.	Child and dependent care expenses as defined by I.R.C. § 21.	Yes	72 Pa. Stat. Ann. § 1601-W et seq.
Rhode Island	Yes	Rhode Island provides a child and dependent care credit based off of the federal tax credit.	25%	Child and dependent care expenses as defined by I.R.C. § 21.	No	44 R.I. Gen. Laws Ann. § 44-30-2.6(F)(g)
South Carolina	Yes	South Carolina provides a child and dependent care credit based off of the federal tax credit.	7%	Child and dependent care expenses as defined by I.R.C. § 21.	No	S.C. Code Ann. § 12-6-3380
Vermont	Yes	Vermont provides a child and dependent care credit based off of the federal tax credit.	72%	Child and dependent care expenses as defined by I.R.C. § 21.	Yes	Vt. Stat. Ann. tit. 32, § 5828c
Virginia	No. However, the state offers a deduction.	Virginia allows taxpayers to claim a deduction for household child and dependent care expenses.	The amount of the deduction is equal to the amount of child and dependent care expenses used to calculate the federal credit, amounting to $3,000 for one dependent or $6,000 for two or more dependents.	Child and dependent care expenses as defined by I.R.C. § 21.	No	Va. Code Ann. § 58.1-322.03(3)
West Virginia	Yes	West Virginia offers a nonrefundable tax credit based off of the federal tax credit.	50%	Child and dependent care expenses as outlined by I.R.C. § 21.	No	W. Va. Code § 11-21-26
Wisconsin	Yes	Wisconsin provides a child and dependent care credit based off of the federal tax credit.	100%	Child and dependent care expenses as defined by I.R.C. § 21.	No	Wis. Stat. Ann. § 71.07(9g)

Policy Considerations

Over the past few years, childcare and eldercare costs have increased well above the rate of inflation. To help offset these rising costs for new families and assist the largest generation to retire in American history, state legislatures may consider enacting tax benefits like CDCTCs. When these tax benefits, states may consider the following key factors.

Eligibility and target population are crucial in determining who benefits from the credit. Many states aim to assist low- to middle-income families, ensuring that the credit reaches those most in need of financial relief. Conversely, some states may choose to broaden eligibility to ensure a wider impact across various income levels. States may also restrict eligibility to families not receiving other public assistance, like TANF, focusing the benefit on working families outside of those systems. A clear understanding of who qualifies for the credit helps ensure it reaches its intended beneficiaries effectively.
Ease of administration is another key consideration. The design of tax credits varies, and in some cases, they may be underutilized due to complexity or lack of awareness among taxpayers. To reduce confusion and administrative burden, states might consider aligning their credits with the federal CDCTC, simplifying the process for taxpayers and tax agencies alike. Simplicity in claiming the credit can encourage greater participation and maximize the benefit's reach.
Credit amounts and refundability play a significant role in determining the overall effectiveness of the tax credit. States offering a larger percentage of the federal credit or providing higher credit amounts are better positioned to help families offset rising care costs. Additionally, making the credit refundable is especially beneficial for low-income taxpayers with little to no tax liability, ensuring they receive meaningful financial assistance. States may also choose to scale credit amounts or adjust refundability based on income, providing more equitable relief while maintaining control over the total cost of the tax expenditure.
Targeting incentives for specific expenses is another option for states. While many states design CDCTCs to cover both childcare and eldercare expenses, some may choose to focus on specific care-related needs depending on their population demographics. Additionally, policymakers can align state credits with the federal credit or design alternative benefits for expenses that may not be fully covered by federal programs, tailoring the credit to the unique needs of their state's residents.

Contact NCSL
Use this form to reach NCSL staff.
Email
Full Name
What is your role?
Is this a press or media inquiry?
Message
Captcha
Admin Email

Related Resources

Updated May 06, 2025

The State of State Budgets Is Stable for Now

Despite a chaotic year for state budgeters, some states still expect revenue growth and are proposing either tax cuts or increased spending on new initiatives. Other states have been forced to close significant budget shortfalls and are forecasting structural deficits in future years.

Fiscal

State Legislatures News

Updated May 06, 2025

FY 2026 State Budget Status

This page tracks the status of FY 2026 state budgets as they are passed by state legislatures and signed by governors.

Fiscal

Map

Table

Updated May 02, 2025

How Proposed Changes to Federal Safety Net Programs Could Affect the States

As part of the current congressional budget reconciliation process, there have been proposals to cut federal funding to states for social service programs including Medicaid, Temporary Assistance for Needy Families (TANF), the Supplemental Nutrition Assistance Program (SNAP) and the Social Services Block Grant (SSBG). Together, these proposed changes could place significant new budget pressure on states to make up the difference in funding.

Health Human Services State-Federal

State Legislatures News

Contact NCSL
For more information on this topic, use this form to reach NCSL staff.
Email
Full Name
What is your role?
Is this a press or media inquiry?
Message
Captcha
Admin Email

Brief Child and Dependent Care Tax Credit Overview

Key Takeaways

The Federal CDCTC

State CDCTCs

Policy Considerations

Contact NCSL

Related Resources

The State of State Budgets Is Stable for Now

FY 2026 State Budget Status

How Proposed Changes to Federal Safety Net Programs Could Affect the States

Contact NCSL

Contact Us

Denver

Washington, D.C.