The federal government first instituted a child and dependent care tax credit (CDCC) in 1976. In 1977, New York State adopted a non-refundable CDCC equal to a percentage of the federal credit. Beginning in 1996, the NYS CDCC was made refundable for New York residents, though it remains nonrefundable for nonresidents. For tax years beginning January 2007 and after, in addition to the federal and state tax credit, eligible New York City residents can claim the New York City Child Care Tax Credit.
WHO ADMINISTERS THE PROGRAM
The federal CDCC is administered by the Internal Revenue Service (IRS). The state CDCC is administered by the New York State Department of Taxation and Finance.
Unlike a government benefit, which is funded through specific allocations and expenditures, federal tax credits are dispersed from tax revenue collected by the IRS.
Summary of the Child & Dependent Care Tax Credit
The Child and Dependent Care Tax Credit is a credit available to workers who have child or dependent care expenses. This credit is available to families of all income levels and is in the form of a credit made against their tax liability. The federal tax credit is not refundable; that is, claimants cannot receive a refund for any part of the credit that is more than their tax liability.
Related Tax Credits
NEW YORK STATE CHILD AND DEPENDENT CARE TAX CREDIT
New York State also provides a Child and Dependent Care Credit. The NYS credit is a percentage of the federal credit. The precise percentage will depend on the claimant’s income. Unlike the federal benefit, however, the state credit can be issued as a refund. This means any amount left after the tax liability has been offset by the credit will be refunded to the claimant.
Information about the NYS Child and Dependent Care Tax Credit is included in each section (Description of, Qualifying For and Applying For) of the Child and Dependent Care Tax Credit.
NEW YORK CITY CHILD CARE TAX CREDIT
The New York City Child and Dependent Care Credit is for families who pay child care expenses for children under the age of four. The credit is a percentage of the New York State credit. The city credit can be used against taxpayer New York City tax liability; any amount left after the tax has been credited will be refunded to the claimant. Information about the NYC Child and Dependent Care Tax Credit is included in each section (Description of, Qualifying For and Applying For) of the Child and Dependent Care Tax Credit.