Pennsylvania Boosts Childcare Tax Credit: A Financial Lifeline for Families

Josh ShapiroCredit: Commonwealth Media Services

BERWYN, PA — In Pennsylvania, the burden of childcare costs has been a growing concern. The average cost in 2023 ranged from $9,000 to $13,000 — consuming over 15 percent of the median family’s annual income. But a recent legislative move promises some relief. Governor Josh Shapiro has overseen an expansion of the Child and Dependent Care Tax Credit, a change expected to benefit more than 210,000 families in the state.

Today, Governor Josh Shapiro, legislative leaders, and the Chester County Chamber of Business & Industry convened at the Upper Main Line YMCA in Chester County. They emphasized the expansion of the Child and Dependent Care Tax Credit, benefiting over 210,000 Pennsylvania families.

The economic implications of the high cost of childcare are far-reaching, not just for families but also for the state. The U.S. Chamber of Commerce reports that Pennsylvania loses $3.47 billion annually in lost earnings, productivity, and tax revenue due to inadequate access to reliable childcare.

Previously, Pennsylvania’s policy was to match only 30 percent of the federal Child and Dependent Care Tax Credit. However, the new legislation, signed into law by Governor Shapiro, ensures the state credit will now match the federal credit fully. This crucial change will help Pennsylvania families offset the rising burden of childcare costs.

The newly expanded Child and Dependent Care Enhancement Tax Credit operates based on the federal credit. To be eligible for the state credit, taxpayers must first receive the federal credit. The expansion means the maximum credit will be $1,050 for one child or $2,100 for two or more children. The credit cap phases down as income levels increase.

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Prior to this expansion, Pennsylvania families could receive a maximum credit of $315 for one child or $630 for two or more children. Under the new law, Pennsylvanians could see a tax credit increase of up to 233% from last year.

The bipartisan support for this bill underscores the widespread recognition of the pressing need to address the childcare crisis. The bill forms part of the fiscal code that built on the bipartisan 2023-24 budget.

Laura Manion, President of the Chester County Chamber of Business and Industry, celebrated the expansion as a “monumental win” for employees and employers across Pennsylvania. She highlighted the increasing unaffordability of childcare, particularly in Chester County, where infant care costs exceed $17,000 annually.

Bertram L. Lawson, II, President and CEO of YMCA of Greater Brandywine, also hailed the expansion. He emphasized that it comes at a critical time when childcare has become both unaffordable and inaccessible for many working families in Pennsylvania. The YMCA of Greater Brandywine is the largest provider of childcare services in Chester County, serving more than 4,500 children and their families.

While the expansion of the Child and Dependent Care Tax Credit is a significant stride towards addressing the childcare crisis in Pennsylvania, stakeholders agree that there’s still much work to be done. This legislation, however, offers hope for a more equitable and accessible childcare system in the state.

For more information about the Childcare and Dependent Care Tax Credit, visit pa.gov/childcaretaxcredit.

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