Obama to Increase Child Care Tax Credit, Elder Care Funding
According to CNN News, President Barack Obama has proposed nearly doubling the tax credit available for child and dependent care for the next tax year. It is part of the President’s Middle Class Task Force initiative established last year to promote economic recovery to be unveiled during the State of the Union address on Wednesday, January 27, 2010.
A fact sheet released by the white house states that two-thirds of families with children are headed by two working parents or a single working parent. Child care costs have grown twice as fast as the median income since 2000. The Child and Dependent Care Tax Credit has only been raised once in 28 years.
In a statement, the Child and Dependent Care Tax Credit rate will increase from 20 percent to 35 percent for families making under $85,000 a year. This would provide a reduction of approximately $900 in taxes owed to the IRS. Families earning between $85,00 and $115,000 would also see an increase in available tax credits.
According to guidelines by the Internal Revenue Service, families paying for care for their children while parents work or look for work may be eligible for a credit on income taxes. The qualifying child must be under the age of 13 and cared for by an outside source (not a member of the family). The available credit is based on income and currently, families can deduct up to $3,000 in child or dependent care expenses for up to one child and up to $6,000 for two.
The downside of the new proposal is that the credit will be considered “non-refundable”, meaning that if families receive a tax refund, the Child and Dependent Care Credit would be limited by overall taxable income.
The initiative also calls for an increase in funding for child care. Lower-income families will receive an additional $1.6 billion, the largest one-year increase in two decades. The funding would allow Child Care and Development Fund to be modified to serve an additional 2235,000 children in America.
Additional recommendations of the Middle Class Task Force include an increase in federal support for elder care, which would help an estimated 38 million Americans who care for elderly relatives to “manage their multiple responsibilities and allowing seniors to live in the community for as long as possible.” The Caregiver Initiative will provide $102.5 million through the Department of Health and Human Services caregiver support programs.