Financing child care eats up a sizeable chunk of a family's weekly budget, especially for lower- to middle-income parents. Many find it hard to afford daycare and need all the help they can get to stay in the workforce to pay the rest of their bills. Iowans struggling to pay for child care need to look into an expanded federal tax benefit recently enacted into law.
The new tax laws signed by President Bush in June contain a good number of pro-family tax relief measures, including an expansion of the existing child care tax credit. Aimed at working parents who struggle paycheck to paycheck to make ends meet, the child care tax credit helps bridge a financial gap for millions of taxpayers.
As the chief Senate negotiator of the 10-year, $1.35 trillion package of tax cuts as it made its way through Congress, I sponsored the floor amendment that expanded the child care tax credit. As a result, U.S. households with a single-parent, both parents working outside the home, a full-time student-parent, or a disabled spouse may qualify for this federal tax credit that offsets dollar-for-dollar the taxes owed to the federal government. Changes I helped shepherd through raise from 30 to 35 percent the maximum tax credit allowed for dependent-related care costs, including adult children and disabled spouses requiring care.
What's more, Congress also increased the maximum eligible expenses from $2,400 to $3,000 for the first dependent and up to $6,000 for two or more. Families with adjusted gross incomes up to $15,000 may apply the full credit and those with higher incomes may apply partial credit.
Beyond the expanded child care tax credit, the new tax laws include other measures that will benefit families with children. For starters, the significant reductions in marginal income tax rates will leave more money in a working family's household budget. This will expand the purchasing power for taxpaying American families by increasing the size of their take-home pay. That means more of their hard-earned money will be available to make saving, spending and investing decisions that makes the most sense for their individual family's needs.
Other family-friendly tax tools now written into the federal tax code include a 25 percent tax credit for employers to build and operate work-site daycare facilities, a permanent extension and expansion of adoption tax benefits, and a doubling of the child tax credit to $1,000, which for the first time is refundable to those who don't earn enough to owe income taxes.
As the top Republican lawmaker on the tax-writing Senate Finance Committee, I will continue working to trim the government's share of American taxpayers' paychecks. Public policies that empower working families -- whether they are first- or fifth-generation Americans -- with the economic freedom and opportunity to raise their children, invest in their education and achieve
long-term financial security will keep the American Dream a positive force in our society. The land of opportunity has motivated millions to work hard and make sacrifices so that their children and grandchildren may live an even better life in the days and years ahead. Family friendly tax laws, like the expanded child care tax credit, will lighten the burden of many working American families and help turn the American Dream into a reality for generations to come in the 21st century.