New Child Tax Credit Gives People $4,000

With the recent expansion of Wisconsin's child and dependent care tax credit, Democratic Governor Tony Evers has taken a step towards his goal of alleviating the financial burden on families grappling with childcare costs in the state.

By doubling the state's contribution to match 100 percent of the federal tax credit and increasing the maximum expenses eligible, the new bill reflects a broader strategy to address childcare costs in the state, with Evers underlining the necessity of a long-term solution that includes direct support for providers.

"The cost of child care is too darn high—making quality child care more affordable across Wisconsin is not just about doing what's best for our kids, it's also critical for keeping more folks and parents in our state's workforce," Evers said in a press release after the bill was signed earlier this month.

Among legislative maneuvers and budget proposals, the increased tax credit stands out as a tangible benefit for Wisconsin's working families, potentially offering up to $4,000 in annual savings for those with two or more children.

Expanding on the nature of Wisconsin's newly signed child tax credit legislation, for those with incomes at or above $43,000, the restructured tax credit offers potential relief up to $2,000 for one child and $4,000 for families with two or more children. It's crucial to note, however, that the actual benefit to each family is capped by their total state income tax liability.

Under the enhanced framework, AB-1023 elevates the cap on eligible expenses of up to $10,000 for one child and $20,000 for two or more children.

The nonrefundable nature of the tax credit, according to reporting in the Wisconsin Examiner, became a point of contention highlighted by Democratic State Senator Chris Larson's failed amendment for a refundable credit, which signifies that while the credit can reduce tax bills to zero, it doesn't result in a refund for any remaining credit balance.

The limitation underlines the nuanced impact of the tax credit on Wisconsin families, particularly those with lower tax liabilities who might not qualify to fully benefit from the maximum credit amounts.

In his press release, the governor pointed to the importance of the legislation as part of a broader initiative to support childcare in Wisconsin, saying that signing the bill "will go a long way toward defraying yearly family expenses on childcare, giving Wisconsinites some breathing room in their household budgets."

While the tax credit presents a forward step in mitigating childcare costs for many Wisconsin families, stakeholders, including childcare advocacy leader Corrine Hendrickson, cautioned to the Wisconsin Examiner that the measure alone doesn't resolve the broader affordability and accessibility challenges facing the state's childcare system.

Hendrickson said that the delayed nature of the tax credit, only realized upon filing income taxes, does little to alleviate immediate financial pressures on families grappling with high childcare costs.

Evers said that while the bill—set to take effect for the tax year 2024—represents an advancement for working families across Wisconsin, there is a continued urgency for a comprehensive approach to childcare support.

"I want to be clear: Wisconsin needs urgent, long-term investments to further reduce out-of-pocket child care costs for working families while making sure child care providers can keep their doors open and lights on," Evers said in the recent press release.