Purpose

The bill adds a new tax subtraction for day care costs paid by a taxpayer. The idea is to help families offset some of the costs of child care when calculating Minnesota individual income tax.

Main Provisions

• Adds Subdivision 36 (Day care costs) to Minnesota Statutes 2024 section 290.0132.
• Day care costs are defined as the amount a taxpayer paid to a licensed child care program for child care in the taxable year.
• A licensed child care program is defined as a child care center or family or group family child care that is licensed under chapter 142B.
• The subtraction equals the amount of day care costs, but it is limited to the amount by which those costs exceed the amount of dependent care assistance the taxpayer excluded from gross income under Section 129 of the Internal Revenue Code (IRC 129).
• In practical terms, taxpayers can subtract day care costs from Minnesota income tax only to the extent those costs are beyond any employer-provided dependent care assistance excluded under IRC 129.

Definitions and Key Terms

• Day care costs
• Subtraction
• Licensed child care program
• Child care center
• Family or group family child care
• Chapter 142B
• Dependent care assistance
• Internal Revenue Code (IRC) Section 129
• Taxable year
• Minnesota Statutes 2024 section 290.0132

Significance and Changes to Law

• Creates a new subtraction in the Minnesota individual income tax calculation.
• Requires that day care costs be paid to licensed programs (as defined) to qualify.
• Ties the subtraction to federal tax treatment by referencing the IRC 129 exclusion for dependent care assistance, limiting the subtraction to amounts beyond what was excluded from gross income under that federal provision.
• No expiration or sunset is stated in the text provided; the change would apply for the taxable year as described.

Practical Impact

• Families with day care expenses paid to licensed providers may reduce their Minnesota taxable income, especially if they did not receive significant employer-provided dependent care assistance, or if their day care costs exceed any such assistance excluded for federal tax purposes.

Example (illustrative)

• Day care costs paid: $8,000 in a tax year
• Employer-provided dependent care assistance excluded from gross income under IRC 129: $2,000
• Minnesota subtraction: $8,000 - $2,000 = $6,000

If there were no IRC 129 exclusion, the subtraction could be up to the full $8,000 (assuming other eligibility conditions are met).

Relevant Terms - day care costs - subtraction - licensed child care program - child care center - family or group family child care - chapter 142B - dependent care assistance - Internal Revenue Code - IRC 129 - Minnesota Statutes 2024 section 290.0132 - Subd. 36 - taxable year