California is one of the priciest states in the U.S. for childcare. At least, if you have kids, you can get a tax break.
California is the fourth most expensive state for childcare, according to the National Database of Childcare Prices 2016-2018 from the U.S. Department of Labor. That’s with a 2023 estimated median annual cost of $12,901, which includes center and home-based care for infants, toddlers, preschool and school-age children.
California is behind New York at $12,901, Hawaii at $13,589 and Massachusetts at $14,817. Data for Colorado, Indiana, New Mexico and Washington D.C. was not reported.
Two tax credits, the earned income tax credit and child and dependent care credit, could save you money on your federal taxes. In California, the young child tax credit could help you save.
Remember: tax credits reduce the amount of tax that you owe, while deductions reduce your taxable income.
Child tax credit
Here’s how you know if your child qualifies for the federal credit. They must:
- Be under age 17 at the end of the year
- Be your son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of one of these (such as a grandchild, niece or nephew)
- Provide no more than half of their own financial support during the year
- Have lived with you for more than half the year
- Be properly claimed as your dependent on your tax return
- Not file a joint return with their spouse for the tax year or file it only to claim a refund of withheld income tax or estimated tax paid
As long as you earned less than $200,000 — or $400,000 if filing a joint return — you could qualify for the full $2,000 per child of the 2023 child tax credit. The refundable part of the credit is worth up to $1,600 for each child. If you earn more, you could be able to claim a partial credit, according to the IRS.
Child and dependent care credit
You could qualify for the child and dependent care tax credit if you paid someone to take care of your kid so you — and your spouse, if filing jointly — could work or look for work, according to the IRS.
You must have lived in the country for more than half of the year, but there are special rules for military personnel.
It’s calculated based on how much you earn and the percent of how much you pay for care that allows you to work, look for work or go to school.
Young child tax credit
If eligible for the young child tax credit, you could get a credit up to $1,117 in California, according to the Franchise Tax Board.
You have to qualify for the California earned income tax credit and have a qualifying child under 6 years old at the end of the tax year.
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