House approves employer child care tax credit from Pennsylvania

Child care seems to have become a priority in many states. Several states have already approved child care tax credits for employers, and many, including Pennsylvania, are in the process of approving similar legislation. Recently, the Pennsylvania House of Representatives approved Pennsylvania’s child care tax credit and sent it to the Senate for review.

Pennsylvania’s Child Care Tax Credit – Who Can Get It?

On Wednesday, the Pennsylvania House of Representatives approved the Employer Child Care Contribution Tax Credit Act (House Bill 1958), which would provide employers with a tax credit to help employees offset child care costs. The House voted 155-47 to approve the bill.

Rep. Liz Hanbidge (D-Montgomery), who co-sponsored the bill with the state, said, “Ensuring a functioning economy requires access to child care. Because without access, there is no labor, no tax revenue, and the economy comes to a halt. Rep. Morgan Cephas (D-Philadelphia).

If approved, the child care tax credit will be 30% of the total contribution an employer makes toward an employee’s child care. You may be eligible for a child care tax credit in Pennsylvania if you contribute up to $500 per employee.

The Employer Child Care Contribution Tax Credit bill would amend the state’s tax reform code to create the credit. If the bill becomes law, employers would be able to claim the child care tax credit in Pennsylvania starting in 2025.

This credit is not counted as income on the employee’s personal income tax return. Additionally, credits are non-transferable and cannot be sold, carried over or refunded.

The Department of Revenue estimates that the Employer Child Care Tax Credit could provide a tax credit of $8.1 million in the first year.

What do you need?

In emphasizing the need for such a program, Hanbidge blamed the state’s worker shortage on the “inadequate pay” of child care workers. According to data from the U.S. Bureau of Labor Statistics last year, the average hourly wage for child care teachers in the state was $14.18 per hour, $1.24 lower than the national average.

Hanbidge also noted that the United States loses approximately $122 billion annually due to a lack of child care. A U.S. Chamber of Commerce report last October estimated that Pennsylvania loses $591 million in tax revenue each year due to child care issues.

Several states, including West Virginia and New York, have implemented similar credits to encourage businesses to offset child care costs for their employees, and Alabama, Connecticut and Wisconsin are also considering similar credits for employers.

Pennsylvania’s employer child care tax credit bill follows the expansion of Pennsylvania’s child care tax credit signed into law by Gov. Josh Shapiro last December. An expansion to allow individuals to claim 100% of the federal child care tax credit they claim also received bipartisan support.