In the near future, we plan on introducing legislation to make changes to the Child and Dependent Care Enhancement Tax Credit.

Pennsylvania offers a state tax credit that can help ease child and dependent care costs for working families. The Child and Dependent Care Enhancement Tax Credit that is available to Pennsylvanians is based on the federal Child and Dependent Care Tax Credit. The state credit is equal to 100 percent of the federal credit.

The credit starts at 35 percent of child and dependent care expenses paid and decreases to 20 percent for higher income levels (over $43,000). The expense amounts used to calculate the credit are capped at $3,000 (one qualifying person) and $6,000 (two or more qualifying persons). The maximum credit is $1,050 (one child/dependent) or $2,100 (two or more children/dependents) and the minimum credit is $600 (one child/dependent) or $1,200 (two or more children/dependents).

 In 2025, the Child and Dependent Care Enhancement Tax Credit delivered $139 million in tax relief to nearly 222,000 Pennsylvanians. The state tax credit is refundable, meaning qualified taxpayers will receive a refund of the credit in the event the credit exceeds their tax liability.   

Beginning with the 2026 tax year, the federal Child and Dependent Care Tax Credit will increase to 50 percent (from 35 percent) of child and dependent care expenses paid. The maximum credit will be $1,500 (one child/dependent), an increase of $450, or $3,000 (two or more children/dependents), an increase of $900.  

In addition, the credit phase-down will change to: 50% (income between $0 and $15,000), phases down from 50% to 35% (income between $15,000 and $45,000), 35% (income between $45,000 and $75,000), phases down from 35% to 20% (income between $75,000 and $105,000), and 20% (income over $105,000).

For married filing jointly, the phase-down will change to: 50% (income between $0 and $15,000), phases down from 50% to 35% (income between $15,000 and $45,000), 35% (income between $45,000 and $150,000), phases down from 35% to 20% (income between $150,000 and $210,000), and 20% (income over $210,000).

Under current state law, Pennsylvania does not automatically conform to changes made to the federal Child and Dependent Care Tax Credit. As such, our proposal will align the state tax credit with the federal credit to provide additional tax relief to Pennsylvania’s working families.