Tax Credit Will Help Families with the High Cost of Care

By State Senator Julie Lassa

As I speak with people across the district and around the state, many tell me they feel like they are working harder and falling farther behind.  And they’re right; real wages continue to stagnate, while the costs of basic necessities continue to rise.  The few jobs being created in our state are mostly low-paying, and we’re still losing middle- and upper-income jobs. All these factors contribute to the fact that people are falling out of the middle class in Wisconsin faster than any other state in the nation, according to the Pew Charitable Trust

One of the reasons middle class families are feeling such a pinch now is the increasing difficulty of balancing the demands of work and family.  For example, according to a 2014 report by ChildCare Aware, Wisconsin is the seventh most expensive state for child care in the nation. The annual cost of child care in Wisconsin in 2011 for a 4-year-old was $9,588, and $10,775 for an infant. That’s higher than the average annual cost of tuition and fees for public colleges in our state. The high cost of child care impacts parents’ ability to choose the best child care for their children. And having to spend such a large percentage of household income on care for children and other dependents means that less of a family’s resources can be spent on food, housing, and other basic necessities.

Children aren’t the only family members who may need expensive care. With our aging population, more individuals are relying on long-term medical care.  If that person’s spouse must continue to work in order to provide income for their family, that means costly home care services must be arranged.  Wisconsin is also in the top ten most expensive states for home health care.  If a loved one receives four hours of care five days a week, costs can range from around $20,000 to $26,000 a year, depending on where you live.

The cost of providing care for children and other loved ones is a major source of financial stress for Wisconsin’s middle class families.  That is why I joined with State Representative Melissa Sargent (D-Madison) to introduce a tax credit for child and dependent care expenses.  This proposal mirrors the current federal tax credit that can be claimed for expenses related to caregiving expenses that are necessary so a family member can hold a job.

Allowable expenses for a qualifying individual under federal law include costs for in-home care or daycare, nursery school or preschool programs, and before-school and after-school care for school-age children. Depending on the claimant’s adjusted gross income, the credit may be worth between 20 and 35 percent of the claimant’s allowable expenses, up to a maximum annual amount of $3,000 if there is one qualifying individual and up to $6,000 if there are two or more qualifying individuals.  Under the proposal I introduced, anyone who is eligible for the federal credit would be able to claim the same amount on their state tax return.

Wisconsin’s hard-working middle class men and women shouldn’t have to struggle to make sure their loved ones are cared for.  A child and dependent care tax credit is one important step toward making sure that people who work hard and play by the rules can provide for their families.