PA’s Child and Dependent Care Enhancement Tax Credit Expanded for 2023

Last year, the Child and Dependent Care Enhancement Tax Credit delivered critical relief to roughly 210,000 families in Pennsylvania. Research has shown that a similar tax credit on the federal level significantly reduced childhood poverty, addressed food insecurity, and helped many families secure their finances. The expansion of this credit for tax year 2023 will be a major help to working families with children in daycare and other people in the Commonwealth who are caring for a family member.

Who Qualifies & How Much is Available?

The Child and Dependent Care Enhancement Tax Credit that is available to Pennsylvanians is based on the federal Child and Dependent Care Tax Credit. That means that taxpayers must receive the federal credit to also be eligible for the state credit in Pennsylvania. The state credit is now equal to 100 percent of the federal credit, meaning: 

• The maximum credit will be $1,050 (one child/dependent) or $2,100 (two or more children/dependents).
• The credit cap phases down as income levels increase.
• The minimum credit will be $600 (one child/dependent) or $1,200 (two or more children/dependents), provided expenses are at least $3,000 per child/dependent.

In order to claim the credit on your PA Personal Income Tax Return (PA-40), you must have incurred care expenses for:

• A dependent child under age 13.
• A spouse who was physically or mentally incapable of self-care and lived with you for more than half the year.
• An individual who was physically or mentally incapable of self-care, lived with you for more than half the year, and either:
  • Was your dependent; or
  • Could have been your dependent, except that he or she received gross income of $4,400 or more, filed a joint return, or could have been claimed as a dependent on another taxpayer’s return.

The credit is refundable, meaning qualified taxpayers will earn the full amount of the credit in a refund, after accounting for any tax obligation due.

Questions about the Pennsylvania Child and Dependent Care Enhancement Tax Credit can be directed to your tax professional.

Source: pa.gov