A Refundable Child and Dependent Care Tax Credit Would Help Offset the High Cost of Child Care for More Families

It came as little surprise last week when we learned that more Kentuckians, and more kids, are living in poverty now than in recent years. In 2010, 26.3 percent of Kentucky’s children were living in poverty – that’s more than one in four. And 19 percent of the total Kentucky population, almost one in five, was living in poverty. For a family of four – poverty means a yearly income of $22,050 or less. However, it takes much more than this for a family to make ends meet.

Women 4 Women’s Basic Economic Security Tables Index (BEST) — which measures the basic needs and assets required for economic security throughout a lifetime — revealed that a single worker in Kentucky must earn an annual wage of $23,988 to be financially stable, and a family with two workers and two children must earn $57,048 a year. That is more than twice the poverty line.

This wage measure includes the cost of paying for child care. The average annual fee for full-time care for an infant in a child care center in Kentucky is $6,500 a year and the average cost for before/after-school care for a school-age child is $5,800. That is almost 1/3 of a family in poverty’s yearly income. When that large of a percentage of a low-income person’s income goes to child care, they’re locked into the ever discouraging cycle of trying to make ends meet – paying for child care to go to work… working to pay for child care.

Kentucky’s policymakers have options for alleviating this harmful cycle for families. One clear way is to update the state Child and Dependent Care Tax Credit (CDCTC), which is designed to help low-income parents afford the cost of child care so they can go to work while their children develop the skills they need to succeed in school.

Right now, working families with the highest child care costs relative to their income don’t receive the full value of their state CDCTC because it is currently not refundable. This means that families who qualify for a credit that is more than the amount of taxes they owe will only receive the portion back that they owe in state income taxes. For example, if a family qualifies for a state CDCTC of $420, but owes only $100 in state income tax, the family will only receive a $100 credit, even though that family qualifies for $420. If that family does not owe any state income taxes, it will not benefit at all from the state CDCTC.

Policymakers can provide the support that low-income Kentucky families need in order to work to make ends meet by making the state CDCTC fully refundable. However, we have yet to hear from our candidates for Governor on whether they would support it. With the upcoming election, now is a key time to ask them what their plan is for improving economic well-being for children and families in our state.

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