Upjohn Author ORCID Identifier

https://orcid.org/0000-0002-3156-0268

Publication Date

3-19-2021

Series

Upjohn Institute working paper ; 21-344

DOI

10.17848/wp21-344

Abstract

The federal Child and Dependent Care Credit (CDCC) subsidizes child care costs for working families. Before 2021, the CDCC was nonrefundable, so only families with positive tax liability after other deductions benefited. I estimate how CDCC eligibility, benefits, and marginal tax rates would change if the credit were made permanently refundable, relative to 2020 CDCC parameters set to be restored in 2022. Under refundability, some 5 percent of single parents gain eligibility and receive on average over $1,000 annually. Eligibility increases are largest among Black and Hispanic households. Increases in marginal tax rates among moderate-income taxpayers are small.

Issue Date

March 2021

Subject Areas

LABOR MARKET ISSUES

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Citation

Pepin, Gabrielle. 2021. "How Would a Permanently Refundable Child and Dependent Care Credit Affect Eligibility, Benefits, and Incentives?" Upjohn Institute Working Paper 21-344. Kalamazoo, MI: W.E. Upjohn Institute for Employment Research. https://doi.org/10.17848/wp21-344