State Child and Dependent Care Tax Provisions: How Does Your State Rank?

Today, as tax-filing season draws to a close, the National Women's Law Center released its 2011 report on state child and dependent care tax provisions, Making Care Less Taxing, accompanied by a report card grading 34 such tax provisions in 28 states, Making the Grade for Care. This tax assistance helps families meet the high costs of child and dependent care. For low- and middle-income families with children between the ages of three and five, child care represents the second largest expense after housing. The average fee for fulltime, center-based child care today ranges from over $4,000 to almost $19,000 annually, and the average fee for full-day adult care is over $16,000 annually. And in tough economic times when many states are cutting back on direct child care assistance, child and dependent care tax benefits are more important than ever.

The report card puts New York State's child and dependent care credit and Oregon's Working Family Child Care Credit at the top of the class with grades of A-. New York offers a credit worth up to $2,310 – more than the federal child and dependent care credit. New York’s credit also is fully refundable for residents, which enables low-income families with limited state tax liability to take full advantage of its benefits. Oregon’s well-designed Working Family Child Care Credit allows eligible families to claim a percentage of an unlimited amount of child care expenses and is refundable.

Two states passed new tax provisions and a few improved existing provisions since 2005, the last time that NWLC analyzed similar state provisions. Nevertheless, there is still vast room for improvement, with most state tax provisions receiving grades of C+ to F. The 14 states that received grades of "F" for offering no employment-related child or dependent care tax provisions are: Alabama, Arizona, Connecticut, Illinois, Indiana, Michigan, Mississippi, Missouri, New Jersey, North Dakota, Pennsylvania, Utah, West Virginia, and Wisconsin. To find out how your state ranks, click here.