The Child Care Tax Credit: Not Just Another Middle-Income Tax Break

The section 21 child and dependent care tax credit has received little attention in recent tax policy debates. When the credit is discussed, its supporters and opponents often treat it as simply another middle-income tax break. The credit is sometimes even confused with the section 24 child tax credit.

The child care tax credit, however, is not just another middle-income tax break. By providing tax relief for work-related costs, it helps offset the work penalty imposed by the income tax and promotes economic efficiency. Common objections to the credit are based on a failure to understand the appropriate tax treatment of work-related costs, such as child care.

In Part A of this article, I describe the current provisions of the child care tax credit. In Part B, I discuss the appropriate tax treatment of work-related costs, as applied to child care. In Part C, I respond to misconceptions about the credit. I explore ways to strengthen the credit in Part D and conclude in Part E. . . .

Click here to read the full text of this article as an Adobe Acrobat PDF.

Alan D. Viard is a resident scholar at AEI.

Photo Credit: iStockphoto/Christopher Meder

For a complete listing of all On the Margin articles, please visit: www.aei.org/onthemargin/.

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

Alan D.
Viard

What's new on AEI

We still don't know how many people Obamacare enrolled
image The war on invisible poverty
image Cutting fat from the budget
image Speaker of the House John Boehner on resetting America’s economic foundation
AEI on Facebook
Events Calendar
  • 22
    MON
  • 23
    TUE
  • 24
    WED
  • 25
    THU
  • 26
    FRI
Monday, September 22, 2014 | 2:30 p.m. – 4:00 p.m.
Policy implications of the new US labor market normal

We welcome you to join us as a panel of economists discuss US wage and price prospects in the coming months and the implications for the Federal Reserve’s current unorthodox monetary policy.

No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled today.
No events scheduled this day.