The childcare tax credit
The childcare tax credit provides a partial tax relief for dual income families with children who require care while their parents work. Families with one or more children in daycare are eligible for a tax credit as high as 30% of care costs. Most dual income couples can take a credit of $600 for one child or $1200 for two or more children. When one spouse does not work outside the home, the couple loses eligibility for the credit.
How much does the average family spend on childcare in the United States per year? In your personal assessment, how helpful would you say the childcare tax credit is for middle income families in our society?
Sample Solution
The childcare tax credit
Child Tax Credit is a benefit that helps with the costs of raising a child if you are on a low income. American parents with children under the age of five are forking over a total of $42 billion for early childcare and education, such as preschool programs. That’s far more than the federal government is currently spending (from progressive think tank Economic Policy Institute). Without substantial government support, Americans are being forced to stretch their budgets and make numerous sacrifices to make up the difference. Although important to low-income families who get it, and often promoted as a way to fight poverty, the Child Tax Credit is not targeted at those families, particularly after the changes made in 2017. About 40% of that $117.5 billion will go to households with incomes above $100,000. A relatively small shares goes to low-income households-15% will go to households with incomes under $30,000.
