The proposed bill establishes a new "home-based child care income tax credit" for taxpayers in New Mexico who file individual income tax returns and do not enroll their dependent children in state-funded or private child care facilities or pre-kindergarten programs. Eligible taxpayers can claim a credit of $1,000 per month for each month their dependent child is not eligible for public school. The bill outlines the application process for certification of eligibility through the early childhood education and care department and specifies that only one credit can be certified per dependent child each month. Additionally, the credit amount will be adjusted for inflation starting in the 2027 taxable year.

The bill also includes provisions for refunding any portion of the credit that exceeds the taxpayer's income tax liability, and it stipulates that married individuals filing separately can only claim half of the credit that would have been available on a joint return. Furthermore, the credit will be included in the tax expenditure budget, and the definition of "dependent child" is clarified to include children aged five or younger who meet specific criteria. The provisions of this act will apply to taxable years beginning on or after January 1, 2026.