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Step Up To Quality Stories

Special Tax Credits More Widely Available to Child Care Programs and Teachers

In 2016, Nebraska became just the second state (after Louisiana paved the way) to create tax credits for early childhood education programs and teachers.

“I’ve traveled all over the country to conferences and have visited with experts in the early childhood education field from all over, and I can tell you we are fortunate in Nebraska to have such broad support for early childhood education in our state,” said First Five Nebraska Deputy Director and Public Policy Manager Elizabeth Lopez Everett. First Five Nebraska is an advocacy organization focused on changing public policy by changing the public conversation about the importance of quality early childhood education.

Making the Law More Inclusive

School Readiness Tax Credits give Nebraska child care and preschool programs incentives based on their Step Up to Quality rating, and give teachers personal tax credits based on their education levels, training and experience. The tax credits are determined based on different levels. For individuals, this means anywhere from $532 to $1,597 that can be credited back on state taxes, depending on the amount of points achieved.

“It’s hard to deliver quality child care services while making ends meet,” Elizabeth said. “The revised tax credits are intended to make that a little easier for providers.”When LB 889, the School Readiness Tax Credit Act, became law and was implemented in 2017, it was found that the bill was written in a way that unintentionally excluded some child care providers, most commonly certain kinds of family home child care business owners. Nebraska’s tax code is complex, and the bill didn’t account for a specific classification of businesses. In its first year of being implemented, just $500,000 of these tax credits were used out of a $5 million cap.

First Five Nebraska and other early childhood education advocacy groups recognized this oversight and got to work to make the law more inclusive. They collaborated with the Nebraska Department of Revenue to make the wording align with the tax code, and partnered with State Senator Brett Lindstrom to introduce a “clean up bill” to make it law.

Three days before the legislature adjourned in August, LB 266 was passed, which clarifies the language of the School Readiness Tax Credit Act and makes it possible for all programs and providers to benefit, as long as they meet the basic requirements, which are now completely in their control.

Start Your CDA Today

Unfortunately, the tax credit it not permanent. Qualifying providers can apply the tax credit to their upcoming 2020 and 2021 tax returns, after which the program expires. The more providers who use the credit, the more likely policy leaders will be to extend the program in the future – so now is the time to take advantage of it.

For early childhood education programs, this means enrolling in Step Up to Quality. Individuals must work for a Step Up to Quality-rated program to qualify for this tax credit.

In addition, individuals must have earned a degree or certification in early childhood development. The base requirement is the Child Development Associate (more commonly referred to as the CDA).

Jill Garrett, Early Childhood Program Director at Kids Can in Omaha, encourages all of her full-time staff members to earn their CDA – and all nine have achieved that goal.

“Obtaining a CDA boosts confidence in care givers,” she said. “It’s achievable and tangible to most educators that are dedicated to making a positive difference in children’s lives.”

Jill said most of her team members have been able to earn the certification in less than a year, making it possible to earn the tax credit quickly, too, because Kids Can is a Step 5 program. She said the tax credit has been meaningful to her entire team, especially during the difficult times related to the pandemic.

“It’s a wonderful recognition of the job they do that often goes unappreciated,” she said. “Child care workers are essential workers. The tax credit shows their work is valued.”