The Pennsylvania House has approved a child care tax credit for employers, aiming to assist employees with child care expenses. The measure, known as House Bill 1958, passed with a 155-47 vote and is now awaiting consideration in the Senate.
The bill proposes a tax credit of 30% of the total contributions made by employers towards their employees’ child care costs, with a maximum of $500 per employee qualifying for the credit. If enacted, employers could begin claiming this credit starting in 2025.
This tax credit would not be considered taxable income for employees and would not be transferable, sold, carried over, or refunded. The Department of Revenue anticipates the credit could amount to approximately $8.1 million in the first year.
The bill’s sponsor highlighted the importance of access to child care for maintaining a functional economy, citing low wages for child care workers as a significant factor contributing to the shortage of workers in Pennsylvania. The average hourly wage for child care workers in the state is $14.18, slightly below the national average. The U.S. loses an estimated $122 billion annually due to inadequate child care, with Pennsylvania alone losing around $591 million each year in tax revenue.
Similar tax credits have been implemented in states like West Virginia and New York, while other states, including Alabama, Connecticut, and Wisconsin, are considering comparable measures. This bill follows the recent expansion of Pennsylvania’s child care tax credit, which allows individuals to claim the full amount of the federal child care tax credit on their state returns.