Governor Evers Signs Bill Expanding Child Tax Credit

Tuesday, March 5th, 2024 -- 12:00 PM

Gov. Tony Evers signed Assembly Bill (AB) 1023, now 2023 Wisconsin Act 101, which expands the current child and dependent care tax credit from 50 percent to 100 percent of the federal credit, helping reduce the tax burden for families struggling to afford the high cost of child care and care for adult dependents.

Act 101, similar to a proposal Gov. Evers recommended in his 2023-25 biennial budget proposal, provides tax relief to over 110,000 Wisconsin taxpayers at an average benefit of over $656 per filer, totaling nearly $73 million in annual tax relief.

2023 Wisconsin Act 101 builds upon the tax relief Gov. Evers has signed into law throughout his time in office. Through the income tax cuts the governor has signed into law to date, Wisconsin taxpayers will see $1.5 billion in tax relief annually, primarily targeted to the middle class.

2023 Wisconsin Act 101 expands the current state child and dependent care tax credit from 50 percent of the federal credit to 100 percent beginning with tax year 2024.

The bill also increases the maximum amount of qualifying expenses, which include child care costs and other expenses related to providing care, that may be claimed for the credit from $3,000 to $10,000 for one qualifying dependent and from $6,000 to $20,000 for two or more qualifying dependents.

These provisions, together, provide a significant boost in tax relief to Wisconsin working families. Under current state law, a filer can claim a maximum credit of between $300 and $525 for one qualifying dependent and between $600 and $1,050 for two or more qualifying dependents, depending on the filer’s income and amount of qualifying expenses.

Under the bill, the maximum credit available to taxpayers will now be between $2,000 and $3,500 for one qualifying dependent and between $4,000 and $7,000 for two or more qualifying dependents.

In practice, this would mean a single head of household filer making $75,000 per year with $5,000 in expenses for one kid would see an increase in their credit from $300 to $1,000 per year. In another example, married-joint filers making a combined income of $150,000 per year with $15,000 in expenses for two kids would see an increase in their credit from $600 to $3,000.

According to a report from The Century Foundation, it is estimated that, without the necessary investments to stave off the looming fiscal cliff facing the state’s child care industry, 2,110 child care programs are projected to close, resulting in the loss of over 4,880 child care jobs, leaving more than 87,000 kids in Wisconsin without child care, resulting in approximately half a billion dollars in economic impacts between parents leaving the workforce and reduced employer productivity.

Gov. Evers has called this scenario “catastrophic,” having “broad, cascading effects across Wisconsin’s economy.” AB 1023, now 2023 Wisconsin Act 101:

• Expands the current law nonrefundable child and dependent care tax credit from 50 percent of the federal credit to 100 percent;
• Increases the maximum qualifying expenses that may be claimed for one qualifying individual from $3,000 to $10,000 and for two or more qualifying individuals from $6,000 to $20,000;
• And applies for tax year 2024 and would reduce individual income tax receipts by an estimated $72.9 million annually.

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