The tax code is used to provide incentives to work, save, care for children, make investments, and other policy goals enacted by Congress. Below are several tax credits available for families with children as well as an analysis by the Congressional Joint Tax Committee of the policy goal and cost of every tax preference that is currently part of the tax code. Tax policy is set by the President and Congress and is subject to change based on national policy goals.
The Child and Dependent Care Tax Credit (DCTC) is available for married couples when one spouse works full-time and the other works at least part-time or goes to school. The credit may also be taken by single parents, and by divorced or separated parents who work and have custody of children. The credit is not refundable.
The Earned Income Tax Credit (EITC) is a federal tax credit for low- and moderate-income working people. It is designed to encourage and reward work as well as offset federal payroll and income taxes. The EITC is “refundable,” which means that if it exceeds a low-wage worker’s income tax liability, the IRS will refund the balance.
Internal Revenue Service Publications related to Dependent Care related issues.
Tax Expenditures – Estimates by the Congressional Joint Tax Committee: ( 3.85 MB )
The Joint Tax Committee provides estimates to Congress about the cost of various provisions contained in the tax code. In each Congress, they release a document providing an analysis of “tax expenditures”, which estimates the cost of each tax credit, tax deduction, or special treatment of an area of the tax code. For example, the five year cost of the current dependent care tax credit is about $13 billion. The JCT analysis shows a five-year estimate of each tax provision plus the income distribution of who benefits from that provision as well as the total number of taxpayers (or corporations) claiming it.