Senate Bill S8632

2025-2026 Legislative Session

Relates to credits for certain household and dependent care services necessary for gainful employment

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Current Bill Status - In Senate Committee Rules Committee

Introduced
- In Committee Assembly
- In Committee Senate
- On Floor Calendar Assembly
- On Floor Calendar Senate
- Passed Assembly
- Passed Senate
Delivered to Governor
Signed By Governor

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Date of Action	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Dec 22, 2025	referred to rules

2025-S8632 (ACTIVE) - Details

Current Committee:: Senate Rules
Law Section:: Tax Law
Laws Affected:: Amd §606, Tax L

2025-S8632 (ACTIVE) - Summary

Relates to the calculation of credits for certain household and dependent care services necessary for gainful employment; removes some references to provisions in the federal budget reconciliation act of 2025.

2025-S8632 (ACTIVE) - Sponsor Memo

                                 
BILL NUMBER: S8632

SPONSOR: GOUNARDES
 
TITLE OF BILL:

An act to amend the tax law, in relation to the calculation of certain
credits for dependent care services necessary for gainful employment

 
PURPOSE OR GENERAL IDEA OF BILL:

To decouple the New York State child and dependent care credit from its
federal counterpart for all tax years beginning in 2026 and to phase out
the credit for extremely high-income households who can already afford
the cost of care.

 
SUMMARY OF PROVISIONS:

Section one of this bill amends subsection (c ) of section 601 of the
Tax Law to provide that all references to the federal child and depend-
ent care credit (CDCC) in IRC § 21 should be to the version of such
section that existed prior to the enactment of Public Law 119-21, also
known as the One Big Beautiful Bill Act (OBBBA). This section also

removes a series of outdated references to the calculation of the NYS
CDCC that have not been applicable since 1996.

This section also begins phasing out the value of the state-level CDCC
at $500,000 in income, or $1,000,000 for taxpayers who file a joint
return, at a gentle two percent.

Section two of this bill sets the effective date.

 
JUSTIFICATION:

The federal child and dependent care credit (CDCC), found in Section 21
of the Internal Revenue Code, is a benign-sounding yet convoluted and
largely inaccessible tax credit that is meant to offset the cost of
working families' child and dependent care expenses. The CDCC has
historically allowed working parents to claim up to 35% of eligible care
expenses for families making up to $15,000 in income, after which point
it gradually phases down until it reaches 20% of care expenses at
$43,000 in income. 1 Expenses are capped at $3,000 for one qualifying
dependent, defined as a minor under the age of 13 or an older dependent
or spouse with a physical or mental disability, or $6,000 for two or
more dependents. After calculating eligible expenses, the credit is then
capped at $600 for households with one dependent, or $1,200 for house-
holds with two or more dependents.

New York State calculates its own CDCC by starting with the value of the
federal CDCC and then multiplying it by a maximum of 110% for incomes of
less than $25,000, meaning that low-income families are getting a 110%
match of their federal CDCC, to a minimum of 20% for families earning
more than $150,000, meaning that these families get a 20% match.2 New
York's credit also deviates from its federal counterpart by allowing for
higher expense maximums of $7,500 for three dependents, $8,500 for four
dependents, and $9,000 for five or more dependents.3 The state credit is
also fully refundable and may be claimed whether or not a filer claimed
the federal credit.


Despite its noble intentions and full refundability, the CDCC has turned
out to be highly regressive in practice, with no upper income limit,
meaning that six- or seven-figure households are able to claim a state-
level CDCC worth 20% of their federal CDCC no matter how much they make,
so long as they have qualifying dependent care. As the CDCC rises with
the level of expense, and as wealthier families can afford to spend
more, the vast majority of credits in New York flow to families making
more than $100,000, who claimed this credit more than 200,000 times in
2021, while households in every other income category below this level
claimed the credit less than 52,000 times.  Furthermore, this credit is
so complicated to claim that an estimated ten percent of households
eligible for the credit actually bother to file for it. In tax year
2023, only 310,000, or 3.3%, of total resident taxpayers in the state
claimed it.4

The 2025 One Big Beautiful Bill Act (OBBBA), which applies to all tax
years starting in 2026, made several notable expansions to the federal
CDCC which widen these disparities further. OBBBA dramatically expanded
the maximum credit rate, from 35% of care expenses at $15,000 to 50%,
phasing down to a minimum of 20% of care expenses for incomes exceeding
$103,000 (or $206,000 for married couples).' It also increased the maxi-
mum credit from $600 for one dependent and $1,200 for two or more depen-
dents to $1,050 and $2,100, respectively. While these changes may sound
like they should benefit families at the $15,000 threshold the most,
virtually no low- or middle-income families will wind up claiming it.

As New York's CDCC is coupled to the federal CDCC in IRC § 21, this
means the state will automatically be absorbing the cost of this massive
expansion of the regressive, uncapped CDCC that disproportionately flows
to high-income households who can better afford the cost of care to
begin with. This bill therefore decouples the state CDCC from the feder-
al expansion, freezing it at its current level while implementing a
commonsense phaseout for extremely high-income filers making more than
$500,000 (or $1,000,000 if married filing jointly).

This commonsense curtailing of the CDCC will free up millions of dollars
in state resources that could be better used for expenditures like the
child tax credit, which is a much more equitable and effective credit
than the CDCC, or universal childcare, which would help to stem the loss
of middle-class households from the state while addressing New York's
urgent affordability crisis.

 
PRIOR LEGISLATIVE HISTORY:

None

 
FISCAL IMPLICATIONS:

TBD. The total cost of the CDCC is projected to hit $120 million in tax
year 2025.

 
EFFECTIVE DATE:
This act shall take effect immediately and apply to taxable years
commencing on or after January 1st, 2026.
1 Crandall-Hollick, Margot. "The 2025 Reconciliation Law Makes Some
Modest Changes to Child Care Tax Benefits, Provides Little Help for
Low-Income Families." Tax Policy Center, 30 July 2025,
taxpolicycenter.org/taxvox/2025-reconciliation-law-makes-some-modest-chan
ges-child-care-tax-benefitsprovides-little.
2 New York State Department of Taxation and Finance. Annual Report on
New York State Tax Expenditures: Fiscal Year 2026. New York State
Department of Taxation and Finance and Division of the Budget, 2024.
3 Tax Law § 606(c)(1-b) New York State Comptroller Thomas DiNapoli. Tax
Provisions under the Federal Reconciliation Bill. 2025.

2025-S8632 (ACTIVE) - Bill Text download pdf

                             
                     S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   8632
 
                        2025-2026 Regular Sessions
 
                             I N  S E N A T E
 
                             December 22, 2025
                                ___________
 
 Introduced by Sen. GOUNARDES -- read twice and ordered printed, and when
   printed to be committed to the Committee on Rules
 
 AN  ACT  to amend the tax law, in relation to the calculation of certain
   credits for dependent care services necessary for gainful employment
 
   THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section 1. Subsection (c) of section 606 of the tax law, as amended by
 chapter  309 of the laws of 1996, paragraph 1 as amended by section 1 of
 part M of chapter 63 of the laws of 2000,  paragraph  1-a  as  added  by
 section  1  and paragraph 1-b as added by section 2 of part T of chapter
 59 of the laws of 2017, and paragraph 4 as amended by section 2 of  part
 J of chapter 59 of the laws of 2014, is amended to read as follows:
   (c) Credit for certain household and dependent care services necessary
 for gainful employment.
   (1)  A  taxpayer shall be allowed a credit as provided herein equal to
 the applicable percentage of the credit allowable under section  twenty-
 one  of  the  internal  revenue  code for the same taxable year (without
 regard to whether the taxpayer in fact claimed  the  credit  under  such
 section  twenty-one  for  such  taxable year). The applicable percentage
 shall be the sum of (i) twenty percent and (ii) a multiplier  multiplied
 by  a fraction. [For taxable years beginning in nineteen hundred ninety-
 six and nineteen hundred ninety-seven, the numerator  of  such  fraction
 shall  be the lesser of (i) four thousand dollars or (ii) fourteen thou-
 sand dollars less the New York adjusted gross  income  for  the  taxable
 year,  provided, however, the numerator shall not be less than zero. For
 the taxable year beginning in nineteen hundred ninety-eight, the numera-
 tor of such fraction shall  be  the  lesser  of  (i)  thirteen  thousand
 dollars or (ii) thirty thousand dollars less the New York adjusted gross
 income  for the taxable year, provided, however, the numerator shall not
 be less than zero. For taxable years beginning in nineteen hundred nine-
 ty-nine, the numerator of such fraction  shall  be  the  lesser  of  (i)

  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
                                                            LBD14217-01-5

 S. 8632                             2

 fifteen  thousand  dollars  or  (ii) fifty thousand dollars less the New
 York adjusted gross income for the taxable year, provided, however,  the
 numerator  shall  not  be  less  than zero.] For taxable years beginning
 after nineteen hundred ninety-nine, the numerator of such fraction shall
 be  the  lesser of (i) fifteen thousand dollars or (ii) sixty-five thou-
 sand dollars less the New York adjusted gross  income  for  the  taxable
 year,  provided, however, the numerator shall not be less than zero. The
 denominator of such fraction shall be [four thousand dollars for taxable
 years beginning in nineteen  hundred  ninety-six  and  nineteen  hundred
 ninety-seven,  thirteen  thousand dollars for the taxable year beginning
 in nineteen hundred ninety-eight,  and]  fifteen  thousand  dollars  for
 taxable  years beginning after nineteen hundred ninety-eight. The multi-
 plier shall be [ten percent for  taxable  years  beginning  in  nineteen
 hundred  ninety-six,  forty percent for taxable years beginning in nine-
 teen hundred ninety-seven, and] eighty percent for taxable years  begin-
 ning after nineteen hundred ninety-seven. Provided, however, for taxable
 years  beginning  after nineteen hundred ninety-nine, for a person whose
 New York adjusted gross income is less than forty thousand dollars, such
 applicable percentage shall be equal to (i) one  hundred  percent,  plus
 (ii)  ten  percent multiplied by a fraction whose numerator shall be the
 lesser of (i) fifteen thousand dollars or (ii)  forty  thousand  dollars
 less  the  New York adjusted gross income for the taxable year, provided
 such numerator shall not be less than zero, and whose denominator  shall
 be  fifteen  thousand  dollars. Provided, further, that if the reversion
 event, as defined in this paragraph, occurs, the  applicable  percentage
 shall, for taxable years ending on or after the date on which the rever-
 sion  event  occurred,  be  determined using the rules specified in this
 paragraph applicable to taxable  years  beginning  in  nineteen  hundred
 ninety-nine. The reversion event shall be deemed to have occurred on the
 date  on which federal action, including but not limited to, administra-
 tive, statutory or regulatory changes, materially reduces or  eliminates
 New  York  state's  allocation  of  the federal temporary assistance for
 needy families block grant, or materially reduces  the  ability  of  the
 state  to  spend  federal  temporary assistance for needy families block
 grant funds for the credit for  certain  household  and  dependent  care
 services necessary for gainful employment or to apply state general fund
 spending on the credit for certain household and dependent care services
 necessary  for  gainful  employment  toward the temporary assistance for
 needy families block grant maintenance of effort  requirement,  and  the
 commissioner  of the office of temporary and disability assistance shall
 certify the date of such event to the commissioner, the director of  the
 division  of  the budget, the speaker of the assembly, and the temporary
 president of the senate. FOR THE PURPOSES OF THIS SUBSECTION, ANY REFER-
 ENCE TO SECTION TWENTY-ONE OF THE  INTERNAL  REVENUE  CODE  SHALL  BE  A
 REFERENCE  TO SUCH SECTION AS IT EXISTED IMMEDIATELY PRIOR TO THE ENACT-
 MENT OF PUBLIC LAW 119-21.
   (1-a) For taxable years beginning after two thousand seventeen, for  a
 taxpayer  with New York adjusted gross income of at least fifty thousand
 dollars but less than one hundred fifty thousand dollars, the applicable
 percentage shall be the applicable percentage otherwise  computed  under
 paragraph one of this subsection multiplied by a factor as follows:
   If New York adjusted gross
   income is:                                         The factor is:
   At least $50,000 and less
   than $55,000                                       1.1682
   At least $55,000 and less
 S. 8632                             3
 
   than $60,000                                       1.2733
   At least $60,000 and less
   than $65,000                                       2.322
   At least $65,000 and less
   than $150,000                                      3.000
   PROVIDED,  HOWEVER, THAT FOR TAXABLE YEARS BEGINNING ON OR AFTER JANU-
 ARY FIRST,  TWO  THOUSAND  TWENTY-SIX,  THE  CREDIT  DESCRIBED  IN  THIS
 SUBSECTION  SHALL  BE  REDUCED  BY  TWENTY DOLLARS FOR EACH ONE THOUSAND
 DOLLARS BY WHICH THE TAXPAYER'S NEW YORK ADJUSTED GROSS  INCOME  EXCEEDS
 FIVE  HUNDRED  THOUSAND  DOLLARS,  OR, IN THE CASE OF A JOINT RETURN, BY
 TWENTY DOLLARS FOR EACH ONE THOUSAND DOLLARS BY WHICH THE TAXPAYER'S NEW
 YORK ADJUSTED  GROSS  INCOME  EXCEEDS  ONE  MILLION  DOLLARS;  PROVIDED,
 FURTHER, THAT THE CREDIT SHALL NEVER BE REDUCED BELOW ZERO.
   (1-b)  Notwithstanding  anything in this subsection to the contrary, a
 taxpayer shall be allowed a credit as provided in this subsection  equal
 to the applicable percentage of the credit allowable under section twen-
 ty-one  of the internal revenue code AS SUCH SECTION EXISTED IMMEDIATELY
 PRIOR TO THE ENACTMENT OF PUBLIC LAW 119-21 for the  same  taxable  year
 (without regard to whether the taxpayer in fact claimed the credit under
 such  section  twenty-one  for  such  taxable year) that would have been
 allowed absent the application of section 21(c) of such code for taxpay-
 ers with more than two qualifying individuals,  provided  however,  that
 the credit shall be calculated as if the dollar limit on amount credita-
 ble  shall  not  exceed seven thousand five hundred dollars if there are
 three qualifying individuals, eight thousand  five  hundred  dollars  if
 there  are  four  qualifying  individuals,  and nine thousand dollars if
 there are five or more qualifying individuals.
   (2) Residents. In the case of a resident taxpayer,  the  credit  under
 this subsection shall be allowed against the taxes imposed by this arti-
 cle  for the taxable year reduced by the credits permitted by this arti-
 cle.  If the credit exceeds the tax as  so  reduced,  the  taxpayer  may
 receive,  and  the  comptroller, subject to a certificate of the commis-
 sioner, shall pay as an overpayment, without  interest,  the  amount  of
 such excess.
   (3)  Nonresidents.  In  the case of a nonresident taxpayer, the credit
 under this subsection shall be allowed against the tax determined  under
 subsections  (a)  through  (d) of section six hundred one. The amount of
 the credit shall not exceed the tax determined  under  such  subsections
 for  the  taxable  year reduced by the credit permitted under subsection
 (b) of this section.
   (4) Part-year residents. In the case of a part-year resident taxpayer,
 the credit under this subsection shall be allowed against the tax deter-
 mined under subsections (a) through  (d)  of  section  six  hundred  one
 reduced  by  the  credit permitted under subsection (b) of this section,
 and any excess credit after such application shall  be  allowed  against
 the  tax  imposed  by  section  six hundred three. Any remaining excess,
 after such application, shall be refunded as provided in  paragraph  two
 hereof,  provided,  however,  that  any overpayment under such paragraph
 shall be limited to the amount of the remaining excess multiplied  by  a
 fraction,  the  numerator  of which is federal adjusted gross income for
 the period of residence, computed as if the  taxable  year  for  federal
 income  tax  purposes  were  limited to the period of residence, and the
 denominator of which is federal adjusted gross income  for  the  taxable
 year.
   (5)  In  the  case  of  [a  husband and wife] SPOUSES who file a joint
 federal return, but who are required to determine their New  York  taxes
 S. 8632                             4
 
 separately,  the  credit allowed pursuant to this subsection may only be
 applied against the tax imposed on the spouse  with  the  lower  taxable
 income,  computed  without  regard  to  such  credit.  In the case of [a
 husband and wife] SPOUSES who are not required to file a federal return,
 the credit under this subsection shall be allowed only if such taxpayers
 file a joint New York income tax return.
   § 2. This act shall take effect immediately and shall apply to taxable
 years commencing on or after January 1, 2026.

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Senate Bill S8632

Sponsored By

Current Bill Status - In Senate Committee Rules Committee

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2025-S8632 (ACTIVE) - Details

2025-S8632 (ACTIVE) - Summary

2025-S8632 (ACTIVE) - Sponsor Memo

2025-S8632 (ACTIVE) - Bill Text download pdf

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Sponsored By

Andrew Gounardes

Current Bill Status - In Senate Committee Rules Committee

Actions

2025-S8632 (ACTIVE) - Details

2025-S8632 (ACTIVE) - Summary

2025-S8632 (ACTIVE) - Sponsor Memo

2025-S8632 (ACTIVE) - Bill Text download pdf

Comments