Relating to the Iowa child and dependent care credit by increasing the Iowa net income threshold levels for purposes of calculating the Iowa child and dependent care credit available against the individual income tax, making appropriations, and including retroactive applicability provisions

This bill increases the Iowa net income threshold levels for purposes of calculating the Iowa child and dependent care credit available against the individual income tax, and makes an appropriation. DIVISION I —— CHILD AND DEPENDENT CARE CREDIT. The Iowa child and dependent care tax credit is a refundable credit calculated as a percentage of the nonrefundable federal child and dependent care tax credit, depending on the Iowa net income of the taxpayer. Currently, there are seven graduated Iowa net income thresholds used to calculate the credit. The bill increases these graduated thresholds from seven threshold levels to eight threshold levels, and changes the percentage of the nonrefundable federal child and dependent care tax credit used to calculate the Iowa child and dependent child care tax credit. Currently, the credit percentages in these seven Iowa net income thresholds range from a high of percent of the federal credit for taxpayers with net income of less than $10,000, to a low of percent of the federal credit for taxpayers with net income of $40,000 or more but less than $45,000. Under the bill, the credit percentages in the thresholds range from a high of 100 percent of the federal credit for taxpayers with a net income of less than $45,000 to a low of percent of the federal credit for taxpayers with net income of $175,000 or more but less than $250,000. The division applies retroactively to January 1, 2021, for tax years beginning on or after that date. DIVISION II. The bill makes an appropriation from the taxpayer relief fund to the general fund of the state for fiscal year 2022 to account for the increase in the amount of child and dependent care credits allowed in tax year 2021 due to the bill.