LEGISLATIVE SERVICES AGENCY
OFFICE OF FISCAL AND MANAGEMENT ANALYSIS
200 W. Washington St., Suite 301
Indianapolis, IN 46204
(317) 233-0696
iga.in.gov
FISCAL IMPACT STATEMENT
LS 6694 NOTE PREPARED: Dec 28, 2021
BILL NUMBER: SB 234 BILL AMENDED:
SUBJECT: Child and Dependent Care Tax Credit.
FIRST AUTHOR: Sen. Taylor G BILL STATUS: As Introduced
FIRST SPONSOR:
FUNDS AFFECTED:XGENERAL IMPACT: State
DEDICATED
FEDERAL
Summary of Legislation: The bill provides a refundable child and dependent care tax credit to taxpayers
whose adjusted gross income for the taxable year is not more than 250% of the federal poverty level. It
provides that the credit is equal to the lesser of: (1) an amount ranging from $200 to $1,000, depending on
the extent to which the taxpayer's adjusted gross income exceeds the federal poverty level; or (2) 20% of the
taxpayer's employment related expenses.
Effective Date: January 1, 2022 (retroactive).
Explanation of State Expenditures: Department of State Revenue (DOR): The DOR will incur additional
expenses to revise tax forms, instructions, and computer programs to enact the provisions in the bill. The
DOR's current level of resources should be sufficient to implement these changes.
Explanation of State Revenues: The bill creates a refundable state income tax credit for individuals with
employment related expenses whose Indiana adjusted gross income (AGI) is not more than 250% of the
federal poverty level (FPL). The tax credit will reduce the tax liability for individual taxpayers starting in
tax year 2022. It would reduce state General Fund revenues between $115 M and $231 M annually beginning
in FY 2023.
The amount of the tax credit is 20% of the amount of employment related expenses incurred during the
taxable year, up to a cap that depends on the taxpayer’s AGI. The bill establishes maximum credit amounts
as follows:
• Up to $1,000 for taxpayers with Indiana AGI of not more than 185% of the FPL
• Up to $800 for taxpayers with Indiana AGI greater than 185% but not more than 201% of the FPL
SB 234 1 • Up to $600 for taxpayers with Indiana AGI greater than 201% but not more than 217% of the FPL
• Up to $400 for taxpayers with Indiana AGI greater than 217% but not more than 233% of the FPL
• Up to $200 for taxpayers with Indiana AGI greater than 233% but not more than 250% of the FPL
Taxpayers with Indiana AGI greater than 250% of the FPL in may not claim the tax credit even if they have
employment related expenses. [The credits will reduce General Fund revenue equal to the amount of credits
claimed.]
Additional Information - The bill defines employment related expenses as the amount paid for the care of
a qualifying individual and incurred to enable a taxpayer to be gainfully employed. The estimate uses 2019
individual income tax return data and the average annual cost of childcare in Indiana, which ranges from
about $9,500 to $12,600. Costs likely vary outside that range depending on the specific age of the child, the
location of the childcare provider, and for purposes of the credit, the amount of child care that qualifies as
an employment related expense under the bill. The upper range of the estimate assumes that eligible
taxpayers are claiming the full credit amount for which they may be eligible, and the lower estimate assumes
that the balance of credits claimed will be lower than the maximum possible.
Explanation of Local Expenditures:
Explanation of Local Revenues:
State Agencies Affected: Department of State Revenue.
Local Agencies Affected:
Information Sources: LSA Income Tax Database; 2021 Poverty Guidelines, U.S. Department of Health
and Human Services; The cost of childcare in Indiana, Economic Policy Institute, epi.org.
Fiscal Analyst: Olivia Smith, 317-232-9869.
SB 234 2