SB 395 creates a new refundable Indiana income tax credit for taxpayers with child and dependent care expenses and relatively low incomes. The credit is available to individual taxpayers, including joint filers, whose adjusted gross income does not exceed 250% of the federal poverty level and who incur employment-related expenses for the care of a qualifying individual. The bill defines employment-related expenses largely by reference to federal tax concepts and excludes certain overnight camp costs and care services that do not comply with applicable state and local laws.
The credit amount is tied to both income and expenses. Taxpayers may claim the lesser of 20% of qualifying care expenses or a fixed dollar cap that ranges from $1,000 for the lowest-income eligible taxpayers down to $200 for those near the top of the income limit. If the credit exceeds the taxpayer’s state income tax liability, the excess is refundable, meaning the taxpayer can receive the balance as a refund. The bill also authorizes the Department of Revenue to adopt rules and require an application form to administer the credit.
The bill would add a new chapter to Indiana Code under IC 6-3.1-35.1 and would apply retroactively to taxable years beginning after December 31, 2024. It also includes an emergency clause and is set to expire January 1, 2028, indicating it is intended as a temporary policy. In practical terms, the measure would reduce state income tax revenue by providing direct tax relief to eligible working families with dependent care costs.
Because there were no committee transcripts or recorded votes provided, there is no documented debate or formal vote history to gauge legislative sentiment. Based on the bill’s structure, the policy appears aimed at supporting low- and moderate-income working parents and caregivers by offsetting child care and dependent care costs. The absence of recorded discussion also means there is no identified opposition or amendment-based controversy in the materials provided.
The main points of potential contention are likely to be fiscal cost, the income eligibility cutoff, and the decision to make the credit refundable. The bill also limits the credit to care expenses that comply with applicable laws, which could raise questions about documentation and eligibility for informal care arrangements. Any debate would likely center on balancing family support against state revenue impacts and administrative complexity.
Impact
SB 395 would create a new refundable child and dependent care tax credit in Indiana law, adding IC 6-3.1-35.1 to the Indiana Code. It would affect individual income taxpayers with qualifying employment-related care expenses and adjusted gross income at or below 250% of the federal poverty level, with credit amounts scaled by income and capped between $200 and $1,000. Because the credit is refundable, it could generate payments even when a taxpayer owes little or no state income tax, and it would require the Department of Revenue to administer the program through rules and forms.
Sentiment
No committee testimony or vote record was provided, so there is no direct evidence of support or opposition in the available materials. The bill’s design suggests a generally pro-family, pro-work policy approach intended to help lower-income taxpayers cover dependent care costs. The inclusion of a refundable credit and an emergency clause indicates the sponsor viewed the measure as timely and important, but the fiscal implications would likely be a central consideration for lawmakers.
Contention
The likely areas of contention are the cost to the state treasury, whether the income cap is set appropriately, and whether a refundable credit is the best mechanism for delivering relief. Some may question the administrative burden of verifying qualifying expenses and compliance with state and local laws, while others may focus on whether the credit should be broader or more targeted. No specific opponents, amendments, or recorded objections are available in the provided context.
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