What is the State Dependent Care Tax Credit?
This is a state version of the Federal Child and Dependent Care Credit in which the tax filer receives a credit for care expenses incurred so that they are able to work elsewhere. Home care or adult day care costs are examples of work-related expenses that are eligible.
How do State Dependent Care Credits Work?
Most states simply allow tax filers to deduct a percentage of their federal tax credit from their state tax returns. For example, the Delaware Dependent Care Tax Credit is 50% of the Federal amount. If your Federal credit is the maximum $1,050, you can also deduct $525 for your state taxes. Note that many states apply a range of percentages based on your income. For example, instead of 50%, those with higher incomes might be allowed 35% of their Federal credit.
Which States have Dependent Care Credits?
Twenty-five states have a Dependent Care Credit. The table below includes the income limit, maximum credit amount and the method by which the state calculates the credit amount.
|State||Income Limit with 1 Dependent||Annual Max Benefit for 1 Dependent||Benefit Calculation|
|Arkansas||No limit||$210||20% of federal credit|
|California||$100,000||$525||34-50% of federal credit, depending on income|
|Colorado||$60,000||$525||10-50% of federal credit, depending on income|
|Delaware||No limit||$525||50% of federal credit|
|District of Columbia||No limit||$336||32% of federal credit|
|Georgia||No limit||$315||30% of federal credit|
|Hawaii||No limit||$600||15-25% of eligible expenses, depending on income|
|Iowa||$45,000||$788||30-75% of federal credit, depending on income|
|Kansas||No limit||$263||25% of federal credit|
|Kentucky||No limit||$210||20% of federal credit|
|Louisiana||No limit||$1,050||10-50% of federal credit|
|Maine||No limit||$452||25% of federal credit|
|Maryland||No limit||$484||Deduction of eligible expenses|
|Minnesota||$34,070||$720||100% of federal credit , depending on income|
|Montana||$22,800||$144||Deduction of eligible expenses|
|Nebraska||No limit||$1,050||25-100% of federal credit, depending on income|
|New Mexico||$21,424||$480||40% of eligible expenses|
|New York||No limit||$1,155||20-110% of federal credit, depending on income|
|North Carolina||No limit||$390||7-13% of eligible expenses, depending on income|
|Ohio||$40,000||$1,050||25 or 100% of federal credit, depending on income|
|Oklahoma||No limit||$210||20% of federal credit|
|Oregon||$40,000/year||None||8-40% of eligible expenses, depending on income|
|Rhode Island||No limit||$263||25% of federal credit|
|South Carolina||No limit||$210||7% of eligible expenses|
|Vermont||Refundable credit limit of $30,000 OR Nonrefundable credit with no income limit.||$525||
50% of the federal credit
Nonrefundable 24% of the federal
It can be difficult to determine how to structure one’s expenses and choose between the available tax credits and deductions to get the greatest tax savings. Online tax preparation services such as TurboTax Calculators and Tips can greatly facilitate this process as they enable a tax filer to easily examine multiple scenarios and choose the best approach.