What are "Nebraska School Readiness Tax Credits?"

School Readiness Tax Credits are a package of tax credits designed to increase access to high quality early childhood programs by supporting families, early childhood programs, the early childhood workforce and businesses that support high quality early childhood programs. Most importantly, the tax credits support Nebraska’s youngest children with targeted emphasis on the 64,127 or 42% of all young children from birth to age five considered at risk of failing in school.i

The School Readiness Tax Credits are directly aligned with Nebraska’s Step Up to Quality program administered by the Nebraska Department of Education in partnership with the Nebraska Department of Health and Human Services. The primary goal of Step Up to Quality is to improve early care and education quality and increase positive outcomes for young children.

The School Readiness Tax Credits that would become effective on or after January 1, 2017 are as follows:

  1. Parent Credit: For child care expenses for children in eligible programs rated Step Two or higher in Step Up to Quality.
  2. Early Childhood Program Credit: Refundable credit for eligible early childhood programs rated Step Two or higher. Amount is based on number of children who are either receiving child care subsidy or are in foster care.
  3. Early Childhood Workforce Credit: Refundable credit for early childhood workforce employed at eligible programs participating in Step Up to Quality.
  4. Business-Supported Credit: Refundable credits for businesses that support eligible programs rated Step Two or higher in Step Up to Quality.

1. Parent Credit:

A school readiness child care expense tax credit will be allowed for taxpayers who have a qualified dependent under the age of six who, during the year, attended an eligible early childhood program that participates in the quality rating program and has earned at least Step Two.

The school readiness child care expense credit is based on the quality rating of the child care facility and is a percentage of the existing Nebraska child care expense credit provided for by Nebraska 77-2715.07 (2)(a) or (2)(b) for the taxable year. The school readiness child care expense tax credit is in addition to the regular child care expense credit.

The percentage of the regular child care expense credit allowed for the school readiness tax credit is based on the eligible early childhood program’s Step Up to Quality rating as follows:

Step Up to Quality Rating of Early Childhood Program

Percent of Nebraska Child Care Tax Credit

Step Five

200%

Step Four

150%

Step Three

100%

Step Two

50%

Step One or not participating in Step Up to Quality

0%

Parents with multiple qualifying children are allowed credit for each child with the credits separately calculated. If a child receives services from more than one child care facility during the year, the credit is calculated based on the facility with the highest quality rating.

Example 1

Family’s federal adjusted gross income...........……………… $20,000

Refundable or nonrefundable tax credit………………………… Refundable

State child care credit amount…………………………………….. $50

Qualified dependent under age six that attended a quality rated eligible program………....…….1

Quality rating of the eligible early childhood program…… Step 3

Percentage of state child care credit allowed………………… 100%

School Readiness child care expense tax credit ($50 x 100%)……………………………... $50

The $50 school readiness child care expense credit can be claimed in addition to the $50 regular child care credit and, if the credit exceeds the taxpayer’s tax liability, the excess amount will be refunded.

Example 2

Family’s federal adjusted gross income ……………………… $50,000

Refundable or nonrefundable tax credit……………………... Nonrefundable

State child care credit amount……………………………………. $50

Qualified dependents under age six that attended a quality rated program…………………………………..2

Quality rating of the child care facility for the first child…… 4

Percentage of state child care credit allowed for first child……………………………………………………………150%

School readiness child care expense tax credit for first child ($50 x 150%)…………………………………….$75

Quality rating of the child care facility for second child……… 3

Percentage of state child care credit allowed for second child…………………………………………………………100%

School readiness child care expense tax credit for second child ($50 x 100%)………………………………….$50

Total school readiness child care expense tax credit ($75 + $50)…………………………………………………….$125

The $125 school readiness child care expense credit can be claimed in addition to the $50 regular child care credit and can be applied against the taxpayer’s liability.

2. Early Childhood Program Credit

Early childhood programs where children are served through the Child Care Subsidy Program administered by the Department of Health and Human Services are eligible for the refundable School Readiness Early Childhood Program tax credit.

The tax credit is based on the average monthly number of children described above who attend the early childhood program multiplied by the applicable credit amount based on the quality rating of the program.

Step Up to Quality Rating of Early Childhood Program

Tax Credit Per Eligible Child

Step Five

$1,500

Step Four

$1,250

Step Three

$1,000

Step Two

$750

Step One or not participating in Step Up to Quality

$0

3. Early Childhood Workforce Credit

Early childhood professionals are eligible for a refundable tax credit if they work at least six months for an eligible early childhood program that participates in Step Up to Quality and are registered in the Nebraska Early Childhood Professional Record System.

The refundable tax credit is based on the educational level attained through the classification system to be developed by the State Department of Education.

Early Childhood Workforce Tax Credit Levels

Amount of Refundable School Readiness Tax Credit

Level Four

$3,000

Level Three

$2,500

Level Two

$2,000

Level One

$1,500

In order to receive the credit, the eligible early childhood professional shall file with his or her income tax return an attestation form provided by the Nebraska Early Childhood Professional Record System verifying all requirements and qualifications for the level claimed.

The early childhood workforce tax credit shall be adjusted for taxable years to begin on or after January 1, 2018, by the percentage change in the Consumer Price Index.

4. Tax Credit for Business-Supported Child Care

Businesses are eligible for a refundable tax credit based on a percentage of their eligible business expense and the quality rating of the eligible early childhood program to which the expenses are related. This includes:

  • Expenses to construct, renovate, expand, or repair an eligible early childhood program, purchase equipment for an early childhood program, maintain or operate an early childhood program, not to exceed $50,000 in expenses per tax year;
  • Payments made to an eligible child care facility for child care services to support employees, not to exceed $5,000 per child per tax year; and/or
  • The purchase of child care slots at eligible early childhood programs actually provided or reserved for children of employees, not to exceed $50,000 per tax year.

Step Up to Quality Rating

Percentage of Eligible Expenses

Step Five

20%

Step Four

15%

Step Three

10%

Step Two

5%

Step One

0%

 

[i] Children Age 0-5 At Risk of Failing in School: 2010-2014 http://www.firstfivenebraska.org/uploads/NE_County_Heat_Map_2010-2014_v.12.14.15.pdf

 

 

Download the Nebraska Readiness Tax Credits PDF now! 


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  • commented 2016-03-15 19:15:03 -0500
    Just like Louisiana, huh. When all the cheering dies down, please notice (1) that Louisiana’s government is broke thanks to such tax giveaways and (2) that Louisiana students are among the very lowest in academic achievement in America. Remember, too, that pedagogy has never overcome the developmental damage inflicted on infants and toddlers by life in inadequate households.