HB 364: Income tax; allow a noncustodial parent to claim a tax credit based upon the federal qualified child and dependent care tax credit

Georgia currently offers a state income tax credit for child and dependent care expenses that is based on a percentage of the federal child and dependent care tax credit, and that federal credit is normally only available to a child's custodial parent. This bill changes Georgia's version of the credit (O.C.G.A. § 48-7-29.10) in two ways. First, it sets the state credit permanently at 30 percent of the federal credit amount, replacing an old phased-in schedule that started at 10 percent in 2006 and rose to 30 percent by 2008. Second, and more significantly, it adds a new rule: if a taxpayer is denied the federal credit only because they are not the child's custodial parent, they can still claim the Georgia credit as long as they provided at least half of the child's financial support for the year. The change would take effect July 1, 2025, and would apply starting with tax years that begin on or after January 1, 2026.

• Sets Georgia's child and dependent care tax credit at a flat 30 percent of the federal qualified child and dependent care tax credit under Section 21 of the Internal Revenue Code.
• Removes the old phased-in percentage schedule that gradually raised the credit from 10 percent to 30 percent between 2006 and 2008.
• Creates a new path for noncustodial parents to claim the state credit if they provided at least half of the qualifying child's support for the year, even though the federal credit normally goes to the custodial parent.
• Sets the law to take effect July 1, 2025, applying to tax years starting on or after January 1, 2026.

Georgia parents who pay for child or dependent care, especially noncustodial parents (often those who do not have primary physical custody after a divorce or separation) who currently cannot claim the state credit because the federal credit goes to the custodial parent. The Georgia Department of Revenue would also administer the updated rule.

Noncustodial parents who financially support their children but do not have primary custody would gain access to a state tax credit they currently cannot claim, potentially lowering their Georgia income tax bill starting with the 2026 tax year, provided they cover at least half the child's support costs.

• Section 1 revises subsection (a) of O.C.G.A. § 48-7-29.10 to set the state credit at 30 percent of the federal child and dependent care credit amount, removing the prior year-by-year percentage schedule.
• Section 1 adds language allowing a taxpayer who is denied the federal credit solely because they are not the custodial parent to still claim the Georgia credit if they provided at least half of the child's support for the year.
• Section 2 sets the effective date as July 1, 2025, and specifies the change applies to taxable years beginning on or after January 1, 2026.
• Section 3 repeals any conflicting state laws.

1. 2025-02-12House Second Readers (House)
2. 2025-02-11House First Readers (House)
3. 2025-02-10House Hopper (House)

• Yasmin Neal (D, HD-079)Primary sponsor

• income tax credits
• child care costs
• noncustodial parents
• family tax law