Iowa GOP proposes expanding child care tax credit

High child care costs seen as barrier to joining workforce

Rep. Jacob Bossman, R-Sioux City
Rep. Jacob Bossman, R-Sioux City

DES MOINES — Legislative Republicans are proposing more generous tax credits to make child care more affordable and to get more Iowans into the work force.

“Child care costs are a barrier to workforce, a barrier to employment,” Rep. Jacob Bossman, R-Sioux City, on Monday told the House Ways and Means Committee.

He said he has heard from many constituents who wanted to return to work after having a child but found cost of child care was prohibitive.

In the Senate, Ways and Means Chairman Randy Feenstra, R-Hull, is offering his own version of a child care tax credit as part of an omnibus tax bill.

“This is an opportunity to help parents with children,” he said.

Both versions measure also would apply to expenses related to dependent adult care.

After scaling back his proposal, Bossman’s House File 227 was approved 24-0 and will go to the full House.

“Originally, my thought was that if you want more of something, tax it less, and not to tax money spent on child care,” said Bossman, who said that child care costs can be as high as $1,000 per month per child in some urban areas. But that idea would benefit primarily higher income households that itemize deductions and would cost the state more than $72 million over the next five years.

“So we shifted to the existing tax credit,” he said, which applied to only those who had a taxable income of $45,000 or less. His amendment, approved without opposition, would double that to $90,000. That lowered the impact on state revenue to less than $5 million a year.


Expenses would be limited to those that are “reasonable and customary” for those services, said the nonpartisan Legislative Services Agency. Payments to a taxpayer’s spouse, partner or dependent child would not be eligible for the deduction.

The Iowa Child and Dependent Care Credit, which is based on the federal one, is applied on a sliding scale. The Iowa credit amount ranges from 75 percent of the federal tax credit for net incomes of less than $10,000 to 30 percent for taxpayers whose net incomes are $44,000 to $44,999.

Bossman’s bill would extend the 30-percent credit up to the $90,000 cap.

Feenstra’s proposal calls for a 75 percent credit for taxpayers with net income of $12,000 or less. The credit would drop to 30 percent for incomes of $50,980 to $57,360.

The increase in child-dependent care tax credits “doesn’t begin to address all the issues we have with availability of child care,” Rep. Monica Kurth, D-Davenport, told the committee. She called is a “small step to help a segment of the people.”

l Comments: (319) 398-8375; james.lynch@thegazette.com

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