Families with children will get more in childcare tax credits going forward now that Gov. Josh Shapiro has expanded the Pennsylvania childcare tax credit. The expansion will allow families to claim 100% of the federal childcare tax credit they claimed.
How much credit to expect
Last week, Gov. Shapiro signed into law the expansion of the Pennsylvania childcare tax credit, as well as funding for indigent defense, environmental repairs and student mental health.
“It was the right decision to expand our Pennsylvania credit to take another step toward making our Commonwealth a better place to live and raise a family,” Secretary of Revenue Pat Browne said in a statement.
With the expansion of the Pennsylvania childcare tax credit, taxpayers will get their federal Child Tax Credit matched 100% through the state Child and Dependent Care Enhancement Tax Credit. Thus, a taxpayer must receive the federal credit to qualify for the state’s expanded childcare credit.
The credit amount ranges from $600 to $2,100 depending on an applicant’s income level and number of dependents (the maximum credit amount previously was $1,200). The credit amount phases down as the income level goes up.
A taxpayer with one child can get a maximum credit of $1,050, while with two or more children it is $2,100. The minimum credit amount is $600 for one child and $1,200 for a taxpayer with two or more children.
For example, a family with an income of $43,000 or less will see a jump in their maximum state credit from $315 to $1,050 for one child (from $630 to $2,100 for two children). Similarly, the credit for those making more than $43,000 will increase from $180 to $600 for one child (from $360 to $1,200 for two children).
Pennsylvania childcare tax credit: who qualifies and how to apply
Taxpayers will be able to claim the Pennsylvania childcare tax credit on their PA Personal Income Tax Return (PA-40) if they have incurred child or dependent care expenses for:
- A dependent who is below 13 years.
- A spouse who has lived with you for more than half the year and is physically or mentally incapable of self-care.
- An individual who is your dependent or could have been your dependent, lived with you for more than half the year and is physically or mentally incapable of self-care. However, the person must not be claimed as a dependent on another taxpayer’s return.
Pennsylvania’s childcare tax credit is a refundable credit. This means eligible taxpayers will get the full amount of credit in a refund after deducting any due tax obligation.
When filing PA-40, taxpayers need to complete PA Schedule DC, which enables them to give details on dependents and the expenses incurred for their care. It is recommended that taxpayers use myPATH, the Department of Revenue’s free online filing system, to file PA-40 and Schedule DC.
Visit the Department of Revenue website to get more information on the Pennsylvania childcare tax credit.
