House Bill 1985: Income and Ad Valorem Tax Credit Dependent Children

April 1, 2024April 22, 2024 Bill Tracker

Latest Action

---

The Senate Finance Committee failed to take action on HB 1985 by the April 16 deadline, causing the bill to die in committee.

Explanation of the Bill

---

Income and Ad Valorem Tax Credit for Dependent Children

HB 1985 creates an annual $500 income and ad valorem tax credit for each dependent child living more than half of the taxable year with legally married parents. The bill defines eligible dependent children as 

• age 18 and under,
• qualifying as a dependent of the taxpayer on their federal income tax returns, and
• a natural child of both of the legally married parent filers.¹

Husbands and wives² who file separate returns for a taxable year in which they could have filed jointly may each claim half of the allowable tax credit. 

To claim the income tax credit, families will need to submit an application to the Department of Revenue (DOR). The application shall require families to 

• certify the number of eligible dependent children residing in the taxpayer’s household for more than half of the taxable year, and 
• include a notarized statement indicating the parents of the children are legally married. 

After families have submitted their application, the DOR has 30 days to allocate credits based on the number of children. The amount of the tax credit is capped at $1,000,000 per year for the state. Many families who qualify for the credit would not be able to take advantage of the credit because of the relatively small amount of tax credits set aside. Additionally, many families will be unable to access this tax credit because of the marital status requirement. 

Families are not permitted to carry the credits forward, but they are permitted to use the credit against taxes for the immediately preceding tax year so long as they have not filed an annual return for those taxes.

To claim the ad valorem tax credit, the taxpayer will submit the tax credit documentation provided by the DOR to their local tax collector. The tax collector will apply the tax credit against ad valorem taxes levied on real property.³ The tax collector will then forward the tax credit documentation to the DOR along with the amount of tax credit applied against the payor’s ad valorem taxes. The DOR shall then disburse funds to the tax collector for the amount of the tax credit. This drawn-out process would create additional barriers for taxpayers to access their tax credits. Allowing tax credits against real property would also most benefit middle and upper-income families who are least likely to need additional assistance from the state and would likely have implications for local funds raised for public schools. 

It is unclear if families may use the tax credit for both their income and ad valorem taxes or if they can only apply the credits once at their discretion. 

Additional Tax Credits

HB 1985 brings forward 51 additional code sections for the possibility of amendment. These code sections authorize various tax credits. It is unclear if, when, or how these code sections will be amended, but they are tax credits for diverse topics, such as 

• adoption expenses, 
• child and dependent care expenses, 
• enterprise zones, and
• reforestation efforts.

---

¹ HB 1985 does not specify the definition of a “natural child.”

² Please note that the bill uses the term “legally married parents” interchangeably with the term “husband and wife.” The bill would likely apply to all legally married couples with dependent children regardless of the composition of their families.

_³ HB 1985 does not specify, but real property is typically Class I property. Class I property is single-family, owner-occupied, residential property.