Child Care Tax Credits Part 1 – Supporting Michigan’s Working Families
July 24, 2014 — Last week, I blogged about the concept of tax credits to support the quality of Michigan’s child care system. The next series of child care tax credit blogs that I’ll write will break down each of Louisiana’s four tax credits so that we can better understand how their model if replicated in Michigan could assist families, child care providers, child care teachers and directors, and businesses here in our own state. First, I’ll focus on direct assistance for families.
As I laid out last week, the family child care tax credit allows families to receive a refundable credit for children enrolled in a child care program that has a rating of at least two out of five stars in the state’s Quality Rating and Improvement System. This credit increases in value as families access higher-rated child care programs, and is dependent on the number of children in the family in a two-star rated program or higher. Being refundable allows the lowest-income families – those making $25,000 a year or less in Louisiana – to receive a check in the mail for the amount of their credit. Families making more than $25,000 can apply their credit to their tax liability.
Here in Michigan, we know that child care costs vary significantly with multiple factors influencing cost including the age of the child, the type of care (i.e. a child care center, family-run group home, or someone caring for a family member), and the quality of care. For Michigan’s Children, ensuring that children have access to high quality child care is paramount – regardless of the child’s age or whether they are in a child care center or being watched by grandma. We know that high quality child care is more costly for multiple factors including the ongoing training needed by child care teachers and directors, curricula that may be used, personnel costs as it relates to staffing with appropriate credentials or exceeding minimum licensing requirements as it relates to teacher-child ratios, appropriately engaging and partnering with parents and communities, etc.
A child care tax credit for families will reduce some of the financial burden associated with accessing higher quality care, and may be just the incentive that parents need to opt for higher quality care that will better support their children’s learning and development. While there is a federal tax credit in place for child care that is not refundable, the State of Michigan currently provides no tax relief to families who need child care, so a model similar to Louisiana’s would be welcomed.
If high quality child care is something you, your family or your neighbors struggle to afford, please consider talking to candidates running for public office about this issue.
Learn more about opportunities through child care tax credits in our Issues for Michigan’s Children publication.