Hanbidge and Cephas measure creating child care tax credit for PA businesses included in state budget’s tax code
Rep. Morgan B. Cephas July 11, 2024 | 9:02 PM
HARRISBURG, July 11 – Legislation introduced by state Reps. Liz Hanbidge, D-Montgomery, and Morgan Cephas, D-Phila., that creates a tax credit for Pennsylvania businesses that contribute to their employees’ child care expenses was incorporated into the 2024-25 state budget package today.
The tax credit equals 30% of the total contributions an employer makes toward child care expenses for its workers, counting only the first $500 in contributions made per employee. The credit will not be considered income on the employee's personal income tax return.
“This child care tax credit is an innovative step for Pennsylvania families and businesses. It will help employers retain employees and help employees continue working while ensuring that their children receive high quality child care,” Hanbidge said. “This forward-thinking approach will foster a more supportive and productive work environment, benefiting our state’s economy, our children, and Pennsylvania families.”
“Working parents who know that their children are in safe and quality care can better concentrate on their day-to-day work and overall careers," said Cephas, a co-prime sponsor of the bill. "This tax incentive will go a long way in having more employers include financial assistance for child care in their strategic business plans, creating a more stable workforce in Pennsylvania while continuing to help families re-enter the job market.”
Data from the U.S. Chamber of Commerce shows that lack of child care affects employee productivity, and each employee lost because of a lack of child care access costs companies on average 33% of a worker’s total annual compensation. Absences and employee turnover cost Pennsylvania employers $2.88 billion per year.
Currently in Pennsylvania, the average annual cost of child care for infants is $12,308; for toddlers it’s $11,402; and for four-year-olds it’s $10,158. To be considered affordable for families, child care should not cost more than 7% of a family's annual income. Hanbidge and Cephas said their tax credit will help bridge the affordability gap, making quality child care more accessible to families across the state while supporting Pennsylvania businesses in retaining a stable workforce.