Research from Upjohn Institute Economist Gabrielle Pepin is again in the national spotlight as Pepin presents two pieces of tax credit research at the Allied Social Science Associations' annual meeting Jan. 5-7 in San Antonio.
Both examine the Child and Dependent Care Credit, a tax credit based on income and child care expenses that subsidizes care costs for working families.
On Friday, Jan. 5, Pepin presents research showing the federal Child and Dependent Care Credit meets its goals of helping working families and helping families work, although changes to the program’s structure could improve results.
Around 21 percent of single mothers and married households, and 22 percent of single fathers, qualify for the credit. Most spending on the credit goes to low- and middle-income taxpayers.
Pepin finds increasing the credit encourages parents to buy more child care, in line with its goal of helping working parents pay for child care. A 10 percent increase in Child and Dependent Care Credit benefits increases the use of paid child care 4 to 5 percent.
The credit also leads married mothers to work more hours, Pepin finds. A 10 percent increase in the credit leads married mothers to increase their weekly work hours nearly 1 percent. As working more hours means earning more money, a 10 percent increase in the credit also leads to a 5 percent increase in annual earnings for married mothers.
While the credit meets its goal of helping working parents pay for child care, Pepin concludes, it could help more people. Making the credit refundable would make it available to 19 percent more single mothers and help them enter or stay in the labor force.
Pepin presents the research at 10:15 a.m., Central Time, Friday, Jan. 5 at the ASSA 2024 annual meeting.
Pepin presents the second piece of research, “Not Just for Kids: Child and Dependent Care Credit Benefits for Elder Care,” coauthored by Yulya Truskinovsky of Wayne State University, on Saturday, Jan. 6. They find that many of the 10 percent of Americans 50 to 65 who live with a spouse or parent needing help with daily activities can get help from the Child and Dependent Care Credit — but very few do. Other research shows most credit claims were made exclusively for child dependents.
The paper highlights the large benefits for families caring for older adults, especially in the aftermath of the COVID-19 pandemic. Working households may claim up to $3,000 in care expenses for each of up to two qualifying individuals to receive a nonrefundable tax credit worth up to $1,050 per qualifying person.
Combined with state tax credit supplements of up to $1,055 per person, benefits likely can make a difference: most individuals aged 50 to 65 living with spouses or parents in need of help combine work and caregiving, and about 20 percent have forgone elder care assistance due to costs.
The Child and Dependent Care Credit expanded temporarily during the pandemic, giving a window into how a more generous credit would affect families. If an expansion structured like that one were made permanent, the paper finds, it would encourage work while transferring income to caregivers.
Pepin presents the research at 8 a.m., Central Time, Saturday, Jan. 5 at the ASSA 2024 annual meeting.