The cost of childcare is a concern of many parents. To address this, a bipartisan group of North Dakota legislators has proposed a tax credit for parents. This proposed tax credit for parents in North Dakota would help offset daycare costs and offer much-needed relief to middle-class families.
Tax Credit For Parents: Who Could Get It And How Much?
Last week, the North Dakota senate voted 33-14 in favor of Senate Bill 2237 which proposes a tax credit for parents. The Senate approved the bill despite a “do not pass” recommendation from the chamber’s Finance and Taxation Committee.
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Now, the proposed bill heads to the House of Representatives. The bill is estimated to cost the state about $9.9 million in tax revenue. This proposed legislation was sponsored by Senate Minority Leader Kathy Hogan.
If approved, the legislation would offer an income tax credit to offset certain childcare expenses. The tax credit amount depends on the parents’ federal tax returns. The credit amount will be prorated depending on the ratio of North Dakota taxable income to federal adjusted gross income.
As per the proposed legislation, parents would be allowed to claim the new credit equal to the greater of: 40% of the credit allowed under the federal Child and Dependent Care Credit program, or 10% of the credit allowed under the federal Child Tax Credit.
Taxpayers will be eligible for this credit if their federal adjusted gross income (and of their spouse) isn’t more than the “combined amount of one hundred twenty thousand dollars.” Also, taxpayers need to be a “resident or part-year resident individual or a nonresident individual member of the armed forces” to qualify for the credit.
Points For And Against The Proposal
Advocates of the bill believe the tax credit for parents would benefit middle-class families with incomes between $80,000 and $120,000, and in turn, benefit the state’s labor market as well.
Families in this income bracket aren’t generally eligible for a low-income childcare assistance program. Moreover, unlike other bills, this tax credit would benefit parents directly.
Sen. Jonathan Sickler (R-Grand Forks) says that it is a challenge for working parents to find reasonably priced daycare. This has resulted in many parents leaving the labor market to look after their children full time. Thus, the proposed tax credit for parents would offer financial flexibility to some families to re-enter the workforce.
Those against the bill believe it would burden the state finances. The bill is estimated to cost $9.9 million in tax revenue over the next two-year budget cycle. Those against the bill also say that many other proposals could address the childcare shortage in the state.
If North Dakota approves the legislation, it will join 29 other states that offer childcare tax credits for parents, notes a New York-based nonprofit, the Committee for Economic Development.
