Federal Child Tax Credit
What is the NJ Child Care Credit?
The New Jersey Child Care credit is a tax credit designed to help families pay for their childcare expenditures. Like the Federal child tax credit, qualifying child or dependent care can include day care, camps, and paid care provided by neighbors or relatives, among other qualifying expenses. New Jersey taxpayers can receive a credit of up to 50% of their federal child & dependent care credit depending on their income levels.
Who is Eligible for the NJ Child Care Credit?
The state child tax credit eligibility rules are almost identical to the federal eligibility rules: the taxpayer must take care of a child under the age of 13 or any adult dependent/spouse that lived with the taxpayer for more than half the year and cannot mentally or physically take care of themselves. Taxpayers must have $150,000 or less of New Jersey taxable income in order to be eligible.
Recent Updates to NJ Child Tax Credit
Changes to the law for 2021 have doubled the income limit New Jersey taxpayers can earn annually while remaining eligible for the credit. The maximum income a taxpayer can earn while still receiving the credit jumped from $60,000 to $150,000 a year. The state estimates that 80,000 additional families will be eligible for the credit starting in 2021 because of this increase in income limitations. Before this increase took place, the state only expected 70,000 families would receive the credit.
The new legislation also made other changes. The credit has now become a fully refundable credit. This means that the credit will decrease the tax owed dollar-for-dollar, and may results in a refund if no taxes are owed.
Starting for the 2021 tax year the New Jersey income thresholds are:
New Jersey Taxable Income
Amount of NJ Credit
50% of the federal credit
40% of the federal credit
30% of the federal credit
20% of the federal credit
10% of the federal credit