Stimulus 2021: Child Care Assistance
The recent stimulus package passed by the federal government has three significant tax provisions that can have a positive impact on families like yours. In these challenging times, your child’s education is more essential than ever. Caring for them—and preparing them for school—is our community service. We wanted you to be aware of these opportunities, so you could plan your childcare needs accordingly.
There are three key ways for families to gain child care assistance. Eligibility for all benefits is dependent upon your personal tax situation, including your adjusted gross income and tax filing status.
1. The Child and Dependent Care Tax Credit (CDCTC) is a federal tax credit that can help families off-set the cost of childcare. Previously, families earning $43,000 or less could claim up to $3,000 for one child and $6,000 for two children. This benefit has been increased. For 2021, families earning up to $125,000 can claim refundable credits up to $4,000 for one child and $8,000 for two children, and families earning between $125,000 and $400,000 can claim a portion of the credit. These tax credits are based on your household’s adjusted gross income and credit a portion of expenses up to 50%.
2. The Child Tax Credit (CTC) is a federal tax credit that currently provides up to $2,000 for children under the age of 17. For 2021, under the new stimulus package, the credit increases to $3,000 per child, plus an additional $600 for children under 6, it expands to include 17-year-olds, and it is fully refundable. For qualifying families, the IRS will begin paying the credit in advance in periodic payments.
3. In addition, many employers offer a Dependent Care Flexible Spending Account (FSA) that allows you to set aside pre-tax dollars for childcare costs. The new stimulus bill increases this year’s allowable amount that can be set aside from $5,000 to $10,500.
These tax credits and FSA changes will impact every family differently. As we are not tax professionals, we cannot advise you on the specific impact to your family. It is best to consult with a tax professional or preparer (tax preparation software will also have information) or visit www.irs.gov to learn more.
Financial assistance may be available to help families pay for childcare, allowing parents to focus on work or school knowing that their child is in a healthy and caring environment. Connecticut’s program (CTCare4Kids) has recently changed the parent portion of tuition through September of 2021. Please call 211 for additional information.
If you are a military family, you might qualify for assistance with the cost of childcare through Child Care Aware.
In addition, our Center Directors can provide more information regarding financial assistance and assist you with the process.