A BILL FOR AN ACT to amend the Indiana Code concerning taxation.
Summary
HB 1138 creates a new refundable Indiana individual income tax credit for employment-related child and dependent care expenses. The credit is tied to the federal child and dependent care tax credit under Section 21 of the Internal Revenue Code: a taxpayer must be eligible for the federal credit and may claim an Indiana credit equal to the federal credit amount claimed on the federal return, multiplied by a percentage based on Indiana adjusted gross income.
The percentage schedule is income-based. Taxpayers with adjusted gross income of $40,000 or less may receive 100% of the federal credit amount; those with income over $40,000 up to $60,000 may receive 75%; those over $60,000 up to $75,000 may receive 50%; and taxpayers above $75,000 receive no credit. If the credit exceeds the taxpayer’s remaining Indiana income tax liability, the excess is refundable, meaning the taxpayer can receive a payment even if no tax is owed.
Impact
The bill adds a new section to Indiana Code 6-3-3-11 and would affect state individual adjusted gross income tax liability beginning with taxable years after December 31, 2025. It would reduce state tax revenue by providing a refundable credit to eligible taxpayers with child and dependent care expenses, particularly benefiting lower- and middle-income working families. The bill is retroactive to January 1, 2026, and includes an emergency clause, with the new provision expiring June 30, 2029 unless extended or reenacted.
Sentiment
The available record shows no committee transcript or recorded votes, so there is no documented debate or formal vote history to gauge legislative sentiment. Based on the bill’s structure and caption, it appears designed as a family tax relief measure aimed at supporting working parents and caregivers. The absence of recorded opposition or amendments in the provided materials means sentiment cannot be assessed beyond the bill’s apparent policy intent.
Contention
No specific points of contention are documented in the provided materials because there are no committee transcripts or votes. Potential areas of debate, based on the bill text, would likely include the fiscal cost of making the credit refundable, the choice to phase out benefits above $75,000 of adjusted gross income, and whether tying the state credit directly to the federal credit is the best way to target child care assistance. Any disagreement would likely center on budget impact versus support for working families.