How to Claim the Nebraska Child Tax Credit

The Nebraska Child Care Refundable Tax Credit offers financial assistance to working families, helping to offset the costs associated with raising young children. This state-level program is distinct from federal credits and is specifically designed to address expenses for licensed child care. It operates as a refundable credit, meaning eligible taxpayers can receive the full amount as a refund even if it exceeds their total state tax liability for the year.

Eligibility Requirements for the Credit

To qualify for the Nebraska Child Care Refundable Tax Credit, both the taxpayer and the child must meet specific criteria set by the state. The primary requirement for the taxpayer is based on household income. A family’s total household income, which is defined as their federal modified adjusted gross income, cannot exceed $150,000 for the tax year.

The child must be five years old or younger as of December 31 of the tax year for which the credit is being claimed. Additionally, the parent or legal guardian must claim the child as a dependent on their federal income tax return for that same year.

A central condition for eligibility revolves around the type of child care provider used. The family must demonstrate that the qualifying child is enrolled in a child care program that is licensed under the Child Care Licensing Act. Alternatively, a family may qualify if their child receives care from a license-exempt provider who is enrolled in the state’s child care subsidy program. A third path to eligibility exists if the family’s total household income is at or below 100% of the Federal Poverty Level, regardless of the provider’s licensing status.

Calculating the Credit Amount

The calculation for the Nebraska Child Care Refundable Tax Credit is straightforward and based on established income tiers. The amount is not a percentage of another credit but a fixed dollar value per qualifying child. For households with a total income of $75,000 or less, the credit is $2,000 per eligible child. This provides the maximum benefit to lower-income families facing child care expenses.

For households with a total income between $75,001 and $150,000, the credit amount is reduced to $1,000 per qualifying child. This tiered system allows the state to distribute the available funds in a way that prioritizes those with greater financial need.

Information and Forms for Claiming the Credit

Securing the Nebraska Child Care Refundable Tax Credit involves a preliminary step that must be completed before filing the annual state tax return. Taxpayers must first apply for and reserve their credit amount directly with the Nebraska Department of Revenue. This is accomplished by submitting the Child Care Refundable Tax Credit Application, Form 7203. This form is not part of the standard tax return packet; it is a separate application to certify eligibility.

The application process is handled electronically through the Nebraska Department of Revenue’s online portal, known as the Electronic Document & Application Submission Hub (eDASH). The application window opens at the beginning of the calendar year, typically on January 2, for the preceding tax year. For example, applications for the 2024 tax year open in January 2025. It is important to apply as early as possible, as the total amount of credits is limited to a statewide cap of $15 million and is awarded on a first-come, first-served basis.

Once the Form 7203 application is submitted and approved, the Department of Revenue will issue a certificate to the taxpayer. This certificate contains a unique certification number and the specific credit amount that has been reserved for the family. This information is essential for the next stage of the process. Taxpayers must retain this certificate, as both the number and the approved amount are required to be entered on their Nebraska Individual Income Tax Return.

The Filing Process

After an application has been approved and a certificate with a reserved credit amount has been received from the Nebraska Department of Revenue, the final step is to claim the credit on the annual state tax return. The approved credit is reported on the Nebraska Individual Income Tax Return, Form 1040N. Specifically, the certificate number and the authorized credit amount are entered on line 46 of the form.

Taxpayers can submit their completed Form 1040N through several methods. The most common options include using approved tax preparation software for electronic filing or mailing a paper return to the address specified by the Department of Revenue.

Once the return is submitted and processed, the approved credit amount is applied against the taxpayer’s total Nebraska tax liability. If the credit is larger than the tax owed, the difference is issued to the taxpayer as a state tax refund.