Who will receive and how much?

Families with children will see more child care tax credits in the future as Gov. Josh Shapiro expands the Pennsylvania child care tax credit. The expansion allows families to claim 100% of the federal child care tax credit they claim.

How much credit can I expect?

Last week, Governor Shapiro signed legislation expanding the Pennsylvania child care tax credit and funding for poor defense, environmental repair, and student mental health.

“Expanding the Pennsylvania credit was the right decision to make our commonwealth a better place to live and raise a family,” Tax Secretary Pat Browne said in a statement.

With the expansion of the Pennsylvania Child Care Tax Credit, taxpayers will receive a 100% matching federal child tax credit through the state’s Child and Dependent Care Enhanced Tax Credit. Therefore, taxpayers must take the federal deduction to benefit from the state’s expanded child care deduction.

The deductible ranges from $600 to $2,100, depending on the applicant’s income level and number of dependents (the previous maximum deductible was $1,200). As your income level increases, the credit amount decreases in stages.

Taxpayers with one child can receive a credit of up to $1,050, while taxpayers with two or more children can receive a credit of up to $2,100. The minimum deduction is $600 for one child and $1,200 for taxpayers with two or more children.

For example, for families earning $43,000 or less, the maximum state credit per child would increase from $315 to $1,050 (from $630 to $2,100 for two children). Likewise, the tax credit for people earning more than $43,000 would increase from $180 to $600 per child (from $360 to $1,200 for two children).

Pennsylvania Child Care Tax Credit: Who Qualifies and How to Apply

Taxpayers may claim the Pennsylvania Child Care Tax Credit on their PA Individual Income Tax Return (PA-40) if they incur child or dependent care expenses for:

• Dependents under 13 years of age.
• A spouse who has lived together for more than half a year and who is physically and mentally unable to take care of themselves.
• An individual who is or could have been your dependent and has lived with you for more than half a year and is physically or mentally incapable of self-care. However, the individual must not be listed as a dependent on another taxpayer’s return.

Pennsylvania’s child care tax credit is a refundable tax credit. This means that eligible taxpayers will receive the full amount of their refund after deducting their tax liability.

When filing the PA-40, taxpayers must complete the PA Schedule DC, which allows them to provide details about expenses incurred for dependents and care. Taxpayers are encouraged to file their PA-40 and Schedule DC using myPATH, the Department of Revenue’s free online filing system.

For more information about the Pennsylvania child care tax credit, visit the Internal Revenue Service website.