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Public Statements

Issue Position: Working Families - Children's Issues

Issue Position

By:
Location: Unknown

As the first member of the New York City Council to give birth while in office, I introduced legislation in 1987 called the Virginia bill, named after her now college-aged daughter. Since coming to Congress in 1993, Maloney has continued to fight for safe, affordable, quality child care.

Assistance Available Through the Tax Code for Families with Children

NEW YORK

As the costs of raising a child continue to increase, working families need assistance to make ends meet and manage the difficulties of balancing work and family. Several provisions in the federal tax code are available to help families with children: the Child Tax Credit, the Child and Dependent Care Tax Credit, the Earned Income Tax Credit, and Dependent Care Assistance Programs.

New York also offers assistance through the tax code for families with children through a Child Tax Credit, a Child and Dependent Care Tax Credit, and an Earned Income Tax Credit. New York is one of only two states to offer families all three of these credits. New York's Child Tax Credit and Child and Dependent Care Tax Credit are the most generous of any state, and its Earned Income Tax Credit is among the most generous.

Child Tax Credit

Families with children under age 17 can qualify for a tax credit worth up to $1,000 per child. At the federal level and in one state some families can receive the credit as a refund if the amount they qualify for exceeds the amount of income taxes they owe.

New York State offers the Empire State Child Credit for families with children who qualify for the federal Child Tax Credit and are at least four years old. The credit equals the greater of 33 percent of the federal credit or $100 per child. The maximum value of this credit is $330 per child. Families who qualify for this credit can receive it as a refund if the amount of the credit exceeds their tax liability.

Child and Dependent Care Tax Credit

Working families who pay for child care can qualify for a federal tax credit of up to $2,100, depending on the amount they spend on child care, the number of children in care, and their annual income. In general this credit is available to workers who pay for the care of children under age 13, but in some circumstances the credit is available to workers who must pay for the care of a spouse or other family members who are unable to care for themselves. At the federal level and in some states the credit can only be used to offset tax liability and may not be received as a refund.

New York State provides a tax credit for families with child care expenses. It can be worth as much as $2,310, again depending on the amount they spend on child care, the number of children in care, and their annual income. And unlike the federal credit, the New York credit is available even to families whose income is so low that they do not owe income taxes.

Earned Income Tax Credit

Some working families with incomes less than about $40,000 in 2007 can qualify for a tax credit of up to about $2,900 if they have one child and up to about $4,700 if they have two or more children. In general, the family must have a child under age 19, but special rules apply for children who are full-time students or who are disabled, and a small credit is available for childless workers. At the federal level and in some states families who qualify for more from the EITC than they owe in taxes can receive the difference as a refund.

New York State offers an Earned Income Tax Credit equal to 30 percent of the federal credit. The maximum value of the credit in 2007 is $856 for families with one child and $1,415 for families with two or more children. As at the federal level, families can receive the credit as a refund if the amount of the credit exceeds their tax liability.

Dependent Care Assistance Program

Working families with child care expenses can receive some help with those costs if their employers offer a Dependent Care Assistance Program. A DCAP allows employers to provide child care assistance to their employees as a tax-free benefit. Often this benefit takes the form of a salary-reduction agreement which in effect allows the worker to exclude up to $5,000 in child care expenses from taxable income. Workers do not have to pay income or payroll taxes on the amount of income that is excluded. In general, workers must decide at the beginning of the year how much of their salary to set aside for child care expenses and can only change that amount under limited circumstances. Any amount that is unused by the end of the year is forfeited. The eligibility requirements are generally the same as those for the Child and Dependent Care Tax Credit.

Families may not use both the Child and Dependent Care Tax Credit and the Dependent Care Assistance Program for the same expenses. However, families may be able to claim the Child and Dependent Care Tax Credit for any expenses that are not covered by the Dependent Care Assistance Program.

Steps need to be taken to ensure broader utilization of these tax provisions by promoting awareness, simplifying requirements, removing program rules that deter participation, and making policy changes to ensure that all who qualify can receive the benefits of the provisions.[1]

[1] See Joint Economic Committee, "Families Missing Out on Billions in Tax Credits," April 2007.


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