California Ranks Among Most Expensive States for Raising Kids, Tax Credit Eligibility Explored

California is among the most expensive states in the US for childcare. If you are a parent, you might potentially receive a tax advantage.

The US Department of Labor’s National Database of childcare Prices 2016-2018 ranks California as the fourth most costly state for childcare. 

That’s with a projected median annual cost of $12,901 for 2023, which covers center-based and in-home care for young children (preschool and school age) as well as newborns and toddlers.

California, though trailing behind states like New York, Hawaii, and Massachusetts in income, provides residents with potential savings through two essential tax credits: the earned income tax credit and the child and dependent care credit.

Taxpayers stand to benefit from the federal child tax credit, which grants up to $2,000 per child for those earning less than $200,000 (or $400,000 for joint filers) in the 2023 tax year.

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California’s Tax Relief Unveiled

california-ranks-among-most-expensive-states-raising-kids
California is among the most expensive states in the US for childcare. If you are a parent, you might potentially receive a tax advantage.

The credit, refundable up to $1,600 per child, is available to qualifying dependents under the age of 17 who meet specific criteria, such as providing no more than half of their financial support and living with the taxpayer for over half the year.

Additionally, the child and dependent care tax credit offers relief for those who incurred expenses for childcare services, allowing individuals and joint filers to work or seek employment. 

Eligibility is based on residence duration and income levels, with special considerations for military personnel.

California residents, specifically, can benefit from the young child tax credit, providing up to $1,117, as per the Franchise Tax Board. 

To qualify, individuals must meet the criteria for the California earned income tax credit and have a qualifying child under 6 years old at the end of the tax year.

It is crucial to distinguish between tax credits and deductions: credits directly reduce the amount of tax owed, while deductions decrease taxable income.

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