(a)
(1)For each taxable year beginning on or after January 1, 2000, there shall be allowed as a credit against the “net tax,” as defined in Section 17039, an amount determined in accordance with Section 21 of the Internal Revenue Code, relating to expense for household and dependent care services necessary for gainful employment, as applicable for federal income tax purposes for the taxable year, except as otherwise provided in this section.
(2)The amount of the credit shall be a percentage, as provided in subdivision (b) of the allowable federal credit without taking into account whether there is a federal tax liability.
(b)For the purposes of subdivision (a), the percentage of the allowable federal credit shall be determined as follows:
(1)For taxable years beginning before January 1
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(a)
(1)
For each taxable year beginning on or after January 1, 2000, there shall be allowed as a credit against the “net tax,” as defined in Section 17039, an amount determined in accordance with Section 21 of the Internal Revenue Code, relating to expense for household and dependent care services necessary for gainful employment, as applicable for federal income tax purposes for the taxable year, except as otherwise provided in this section.
(2)
The amount of the credit shall be a percentage, as provided in subdivision (b) of the allowable federal credit without taking into account whether there is a federal tax liability.
(b)
For the purposes of subdivision (a), the percentage of the allowable federal credit shall be determined as follows:
(1)
For taxable years beginning before January 1, 2003:
If the adjusted gross income is:
The percentage of
credit is:
$40,000 or less
63%
Over $40,000 but not over $70,000
53%
Over $70,000 but not over $100,000
42%
Over $100,000
0%
(2)
For taxable years beginning on or after January 1, 2003:
If the adjusted gross income is:
The percentage of
credit is:
$40,000 or less
50%
Over
$40,000 but not over $70,000
43%
Over $70,000 but not over $100,000
34%
Over $100,000
0%
(c)
For purposes of this section, “adjusted gross income” means adjusted gross income as computed for purposes of paragraph (2) of subdivision (h) of
Section 17024.5.
(d)
The credit authorized by this section shall be limited, as follows:
(1)
Employment-related expenses, within the meaning of Section 21 of the Internal Revenue Code, shall be limited to expenses for household services and care provided in this state.
(2)
Earned income, within the meaning of Section 21(d) of the Internal Revenue Code, shall be limited to earned income subject to tax under this part. For purposes of this paragraph, compensation received by a member of the armed forces for active services as a member of the armed forces, other than pensions or retired pay, shall be considered earned income subject to tax under this part, whether or not the member is domiciled in this state.
(e)
For purposes of this section, Section 21(b)(1) of the Internal Revenue Code, relating to a qualifying individual, is modified to additionally provide that a child, as defined in Section 152(f)(1) of the Internal Revenue Code, shall be treated, for purposes of Section 152 of the Internal Revenue Code, as applicable for purposes of this section, as receiving over one-half of their support during the calendar year from the parent having custody for a greater portion of the calendar year, that parent shall be treated as a “custodial parent,” within the meaning of Section 152(e) of the Internal Revenue Code, as applicable for purposes of this section, and the child shall be treated as a qualifying individual under Section 21(b)(1) of the Internal Revenue Code, as applicable for purposes of this section, if both of the following apply:
(1)
The child receives over one-half of their support during the calendar year from their parents who never married each other and who lived apart at all times during the last six months of the calendar year.
(2)
The child is in the custody of one or both of their parents for more than one-half of the calendar year.
(f)
Section 21(g) of the Internal Revenue Code, relating to special rules for 2021, as added by Section 9631(a) of the American Rescue Plan Act of 2021 (Public Law 117-2), shall not apply.