Pennsylvania taxpayers filing their 2023 individual returns can take advantage of the Child and Dependent Care Enhancement Tax Credit for years after December 31, 2022. The expanded credit, enacted at the end of 2023, is aimed to alleviate child and dependent care expenses for working families by allowing individuals to claim 100% of the federal Child and Dependent Care Tax Credit on their PA returns.
Eligibility
In order to qualify for this Pennsylvania credit, taxpayers must have received the federal credit for child and dependent care expenses, and the expenses must have been incurred for:
- A dependent child under the age of 13;
- A spouse who was physically or mentally incapable of self-care and lived with the taxpayer for more than half the year; or
- An individual who was physically or mentally incapable of self-care, lived with the taxpayer for more than half the year, and either:
- Was the taxpayer’s dependent; orCould have been the taxpayer’s dependent, except that he or she received gross income of $4,700 or more, filed a joint return, or could have been claimed as a dependent on another taxpayer’s return.
Changes
Prior to the expansion, the maximum credit Pennsylvania families could receive was $315 (for one child) or $630 (for two or more children). Under the new law, Pennsylvanians could see up to a 233% increase in their tax credits from last year. As income levels increase, the credit cap phases down, meaning that for tax years after 2022:
- The maximum credit will be $1,050 (one child) or $2,100 (two or more children); and
- The minimum credit will be $600 (one child) or $1,200 (two or more children), provided expenses are at least $3,000 per child/dependent.
This credit is refundable, meaning qualified taxpayers will not owe any state taxes on the amount they receive.
How to Apply
When filing the PA Personal Income Tax Return (PA-40), taxpayers will need to complete PA Schedule DC, to report information related to dependent care expenses. Additionally, completed versions of Federal Form 2441 and 1040 Schedule 3, which are required to claim the federal Child and Dependent Care Tax Credit on the federal individual income tax returns, must be included with the PA-40 filing. Pennsylvania taxpayers can file electronically using myPATH, the PA Department of Revenue’s free online filing system. This system is user friendly and walks the taxpayer through all the necessary steps.
Additional Resources
The PA Department of Revenue provides an overview of the credit eligibility and filing process in this YouTube video.
