Bill
HB 4057
Michigan offers a state income tax deduction starting 2026 for net contributions minus qualified withdrawals from designated child care savings accounts to cover eligible costs.
Summary
- HB 4057 is tied to HB 4056 and implements the state individual income tax treatment for a new Child Care Savings Program administered by the Department of Treasury. The program (created in HB 4056) allows individuals to designate savings accounts at financial institutions as “child care savings accounts” to pay for eligible child care costs. HB 4057 amends Michigan’s Income Tax Act (1967 PA 281) to provide an income tax deduction tied to those accounts beginning for tax years on or after January 1, 2026.
Purpose / intent
- Encourage and facilitate saving for child care costs by providing state tax benefits for contributions to and qualified withdrawals from designated child care savings accounts.
Key provisions (what the bill does)
- Tax deduction: For tax years beginning on or after January 1, 2026, taxpayers may deduct from Michigan taxable income the net amount of contributions to a child care savings account minus qualified withdrawals, to the extent not already excluded in determining federal adjusted gross income. (The bill text available indicates a deduction limit of up to $10,000 for a single return; the remainder of that paragraph is truncated in the provided materials.)
- Tie bar: HB 4057 is tied to HB 4056 (the underlying Child Care Savings Program Act) — the tax treatment depends on that program’s establishment.
- Conforming rules and forms: The Department of Treasury must prescribe form(s) and the manner for claiming the deduction; account information (account numbers, year‑end balance, contributions and withdrawals, and receipts for eligible expenses) must be provided with the state return, per HB 4056 provisions.
- Interaction with federal tax: The deduction reflects amounts not already deducted in determining federal adjusted gross income.
Program elements (from HB 4056, which HB 4057 implements for tax treatment)
- Account: Individuals may open a child care savings account at an authorized financial institution and designate it on their state return.
- Eligible costs: Expenses necessary for care and supervision of a “qualified individual” (generally a child or dependent under age 14) that enable the account holder to work, attend training, or seek employment.
- Contributions and growth: Contributions (cash and marketable securities) and interest/earnings grow tax-exempt at the state level if used for qualified costs.
- Non‑qualified withdrawals: Subject to a 10% penalty payable to the Department of Treasury, except for certain exceptions (death, bankruptcy disbursement, transfers to another child care savings account, approved hardship withdrawals—though hardship withdrawals are taxable).
- Recordkeeping: Account holders must keep records (statements, Form 1099, receipts) and retain documentation (generally for at least four years).
Who would be affected
- Parents, guardians, or others with child care expenses for qualified individuals (under age 14) who choose to use a designated child care savings account.
- Financial institutions that offer the accounts (account rules limit institution obligations—institutions are not required to track account qualification or report extra information beyond normal tax reporting).
- Michigan Department of Treasury (rulemaking, forms, and verification responsibilities).
Expected fiscal/administrative impacts
- HB 4056/4057 are designed to reduce state income tax revenue to the extent of deductions claimed (amounts depend on taxpayer participation and deduction limits). Administrative impacts include Treasury rulemaking and taxpayer documentation/verification; financial institutions are largely insulated from new reporting burdens.
Timeline / status (selected)
- Program and deduction intended to apply starting Jan 1, 2026.
- HB 4057 (as introduced) was referred to committee (Economic Competitiveness). HB 4056 is the companion program bill; both must be read together to implement the program and tax benefit.
Notes / caveats
- The provided legislative summary is drawn from the House Fiscal Agency materials and the introduced text; portions of the Income Tax amendment text were truncated in the materials supplied (notably the full deduction limits for joint returns). Consult the final bill text or Legislative Services for exact dollar limits, joint‑return rules, and any amendments adopted during committee or floor action.
Compiled from official sources — confirm details with the bill’s official record.
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