At PreK.com, one of our core missions is to make child care more affordable and accessible to every family in America, while also helping schools grow and thrive in their communities.
COVID-19 has highlighted the importance of early childhood education more than ever before. But, the pandemic has also magnified the challenges facing parents and schools. For example, at least 13% of child care centers and in-home daycares are still closed, according to a survey, and 40% of child care providers say they are dipping into their own savings to get by. 46% of parents also say that their current child care situation isn’t sustainable in the long-term. Without relief that helps children get back into classrooms, it will be difficult for both working families and childcare providers to fully recover.
In an effort to speed up this recovery, Congress and President Biden recently signed into law a new coronavirus-relief bill that will inject hundreds of billions of dollars into the economy and provide direct relief to many Americans and businesses.
This new law—the American Rescue Plan—specifically includes a substantial package for both childcare providers and for families who need child care. Here’s what it means for you:
The American Rescue Plan includes two tax credit provisions intended to help families with children.
- Expansion of the Child Tax Credit (CTC): The CTC is an existing program, which allows families to receive a credit of up to $2,000 per child under age 17. This new law expands that amount to $3,600 for each child under 6 and $3,000 for each child under age 18.
As a tax credit (rather than a tax deduction), the amount you save is credited directly to the taxes you owe the federal government. If the money owed to you from the tax credit is more than the taxes you owe, you can still access the money as a refund.
And this year, rather than waiting until you file your taxes to claim the benefit of the credit, you can get some of the Child Tax Credit back in the form of direct payments in the second half of 2021. So, you may begin to receive half of the credit in monthly installments starting this July, and then you will claim the other half when you file your tax returns in 2022.
- One-Year Expansion of the Child and Dependent Care Tax Credit (CDCTC): This is a tax credit that provides relief for families who spend money on child care. Currently, the CDCTC gives families a tax credit worth 20-35% of their childcare costs. With the new expansion from the American Rescue Plan, families would receive a tax credit as much as 50% of their child care costs, up to $4,000 for a single child or $8,000 for two or more children.
Additionally, the current CDCTC is only partly refundable, meaning that it only provides money back to families whose incomes are high enough to be taxable. But the newly expanded CDCTC would be fully refundable, meaning all families would receive money back, even those in the lowest tax brackets.
Unlike the current CDCTC, which is provided as an annual payment, like a refund, the newly expanded CDCTC will be in the form of monthly payments, which can support your child care needs more immediately.
If you’re a working parent and taxpayer, and you spend money on child care for children under the age of 13, you qualify for the CDCTC. Families earning less than $125,000 per year qualify for the full tax credit of 50% of their child care expenses, while families making between $125,000-$400,000 a year will receive a partial tax credit.
If you have any questions about how to access these new tax credits, feel free to reach out to PreK.com’s Family Adviser team by calling 877-PreK-Now (877-773-5669). We’re a team of parents who have actively sought child care ourselves, and can guide you in the right direction!
FOR CHILDCARE PROVIDERS:
The American Rescue Plan provides nearly $39 billion to childcare providers. This is more than 10 times the amount set aside for child care in the CARES Act last year.
Of the $39 billion the American Rescue Plan makes available to childcare providers, about $15 billion will fund the Child Care and Development Block Grant Program, which helps providers cover payroll, purchase sanitization supplies, and pay for fixed costs like rent.
In order to qualify, your center must meet the following criteria:
- Uphold policies that follow state, local, and CDC guidelines
- Pay each employee no less than what they were earning on the date of your submitted application
- Prioritize providing financial relief to families struggling to pay tuition
The remaining funding from the American Rescue Plan—approximately $24 billion—will go toward a stabilization fund for child care providers. This will be distributed at the state level, and will help childcare providers in a number of ways, including covering personnel costs, rent, facility maintenance and improvements, personal protective equipment (PPE), COVID-related supplies, and more.
How to access these funds from the American Rescue Plan: The amount your center receives will be based on operating expenses and will be distributed by individual state agencies. If you have any questions about how to access this funding, feel free to reach out to PreK.com’s school enrollment team by calling 877-PreK-Now (877-773-5669) or emailing info@PreK.com. Or, reach out to your local CCR&R agency, which can also help you with the application process.