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    "label": "Child Care-Child Care Background",
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    "title": "Child Care-Child Care Background",
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        "Records of the Domestic Policy Council (Clinton Administration)",
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    "ocrText": "-13-\nChild and Dependent Care Tax Credit\nCurrent law.-- There are two provisions of current law that provide benefits to\nindividuals incurring child care expenses necessary for employment, the dependent\ncare credit (section 21) and an exclusion of employer-provided child care assistance\n(section 129).\nThe dependent care credit is a nonrefundable credit equal to a percentage of the\ntaxpayer's child care expenses. The credit percentage starts at 30 percent and is\nphased down to 20 percent between $10,000 and $30,000 of adjusted gross income.\nThe maximum amount of expenses eligible for the credit is $2,400 for one child and\n$4,800 for two or more children. An eligible dependent is a child under 13, or a\ndisabled dependent or spouse.\nCurrent law also permits employees to exclude child care assistance provided by\ntheir employers. The maximum exclusion is $5,000 ($2,500, if married filing separately)\nregardless of the number of children. This provision is more beneficial than the\ndependent care credit for employees with incomes subject to marginal rates above\n20 percent, but is available to employees only if the employer offers this benefit.\nProposal. The Administration proposes to increase the credit percentage\napplicable under the dependent care credit. The proposal would provide a 50-percent\ncredit rate for taxpayers with incomes under $30,000. The credit rate would be phased\ndown to 20 percent between $30,000 and $59,000 of adjusted gross income. The\nproposal would not change the dollar limitation on the amount of expenses that can be\ntaken into account. Thus, the maximum amount of eligible expenses would remain at\n$2,400 for one child and $4,800 for two or more children. The President's proposal\nwould increase the credit for families earning less than $60,000, providing an additional\naverage cut of $358 for these families and eliminating income tax liability for almost all\nfamilies with income below 200 percent of poverty ($35,000 for a family of four) that\ntake the maximum allowable child care expense under the law. It is estimated that the\nproposal would cost $5.2 billion over 5 years.\nThe proposal also would provide a new tax credit to employers providing\ndependent care assistance to their employees by building or expanding child care facil-\nities, operating existing facilities, training child care workers, reserving slots for\nemployees at child care facilities, or providing child care resource and referral services\nto employees. The amount of the credit would be 25 percent of the employer's\nexpenses and may not exceed $150,000 per year. Under current law, employers\nreceive a normal business deduction for those expenses but do not receive any special\ntax benefits. It is estimated that this proposal would cost $500 million over 5 years.\nAnalysis. The actual benefits received under the President's proposal vary"
}