On February 2, the White House officially released the President’s Budget for Fiscal Year 2016. Comprised of 1,000 pages and summarized by the Administration in 312 pages, the proposal focuses on a number of things President Obama discussed in his State of the Union Address. As a result, early child education has emerged as a clear focus: the budget offers a number of initiatives that could have a significant impact on child care assistance for parents and companies with employer sponsored child care programs. While the proposal has yet to be approved by Congress and a number of items may not make the cut, this could have a number of positive effects on parents and employer sponsored child care programs. Read on to see how your taxes might turn out in 2016.
The Child Tax Credit
The President’s Budget suggests permanently raising the refund ability of the child tax credit (CTC). While parents can currently claim a $1,000 credit for each qualifying child, this change would make the CTC partially refundable and reduce the earned income threshold from $10,000 to $3,000. This could make it easier for more parents to afford both corporate and private day care providers, which can cost thousands of dollars every year.
Flexible Spending Accounts
This budget proposes simplifying and expanding child care tax benefits by instituting larger credits of up to $3,000 per child under the age of five. However, to make this possible, the plan would eliminate dependent care flexible spending accounts (FSAs), which are often used as a method of providing employer sponsored child care programs. At least one tax expert has commented that this move will likely be unpopular and is therefore unlikely to pass.
Earned Income Tax Credit
The budget plans to double the maximum Earned Income Tax Credit (EITC) for childless workers to $1,000. Meanwhile, this proposal would make the EITC available to young adult workers ages 21-24, as well as older workers up to Social Security’s full retirement age. This means that qualifying children and taxpayers could use their EITC to pay for childcare. However, experts are uncertain whether this aspect of the budget will pass, and many have suggested that Congress may institute some form of compromise.
The President’s Budget for 2016 could have a number of effects on individuals, families, and businesses. What elements of the proposal do you expect Congress to pass? Tell us about it in the comments below! Helpful sites.