The Iowa Child and Dependent Care tax credit provides child care relief for Iowa families with children younger than 13 years old or disabled dependents. The credit is based off of the federal Child and Dependent Care Tax Credit and is worth 30-75% of the federal credit, depending on the income of the family. Currently, the credit is only available for families with an income under $45,000 and, even for those who qualify, it still falls well short of the actual cost of child care. Once a family makes $1 more than that $45,000 cap, they lose all child care assistance, which is called the “child care cliff.”
Our plan will provide twice as much total tax relief to lower income Iowans by making state’s credit 100% of the federal credit. The bill will eliminate the cliff effect by expanding the credit to more families and phasing out the credit as family income rises up to $250,000. These changes would make the state even more attractive to growing families by providing one of the most competitive Child and Dependent Care Tax Credits in the county. ($15 million)
HF 771, which passed the House during the 2019 session and was supported by the Governor, would extend the income threshold from up to $45,000 to families making up to $90,000. The cliff effect would still impact any family that makes even a dollar more than $90,000 annually. The bill provided no additional child care expense relief for families making less than $45,000 annually.