WeVote
Log In

Bill

Bill

HB 4056

Individual income tax: other; child care savings program; create. Creates new act. TIE BAR WITH: HB 4057'25

2025-2026 Regular Session Introduced by Brian BeGole and 19 co-sponsors

Creates a state Child Care Savings Program allowing tax-exempt contributions, earnings, and qualified withdrawals for future child care costs beginning 2026.

bill electronically reproduced 02/04/2025
#individualincometax:other
0
WeVote Research Nonpartisan
Bill Summary · HB 4056

Summary — HB 4056 (Child Care Savings Program Act)

Note on documents: The materials provided include multiple versions and cross-references (HB 4056 paired with HB 4057). This summary focuses on the child care savings program created by HB 4056 as described in the House Fiscal Agency analysis (introducer: Rep. Bill G. Schuette). HB 4057 is the companion bill that would make the corresponding income‑tax changes (deduction rules and limits).

Main purpose

Create a state‑administered Child Care Savings Program that permits individuals to designate savings accounts for future child care expenses and receive state individual income tax benefits for contributions, earnings, and qualified withdrawals.

Key provisions

  • Establishes the Child Care Savings Program in the Department of Treasury; administered by the State Treasurer or designee.
  • Effective for accounts opened and tax years beginning on or after January 1, 2026.
  • Definition highlights:
    • “Child care savings account”: an account at a financial institution designated on the filer’s state income tax return.
    • “Qualified individual”: a dependent (per IRS §152) under age 14 on the last day of the tax year.
    • “Eligible costs”: child care costs necessary to allow the account holder to work, attend training/education, improve employment opportunities, or search for work.
  • Contributions and account rules:
    • Only cash and marketable securities may be contributed; anyone may contribute (subject to limits under HB 4057).
    • Joint accounts permitted if joint filers file a joint state return; an individual may hold more than one account.
    • Account holder is responsible for use of funds; financial institutions may charge service fees and may accept/maintain accounts but are not required to label or track them.
  • Tax treatment and penalties (subject to HB 4057 for deduction mechanics and limits):
    • Contributions, interest/earnings, and “qualified withdrawals” are exempt from state income taxation.
    • Non‑qualified withdrawals are subject to a 10% penalty payable to the Department of Treasury, except withdrawals for death, certain bankruptcy distributions, transfers between child care accounts, or hardship withdrawals.
    • Hardship withdrawals are permitted for immediate, heavy financial need; they are taxable (not qualified) but exempt from the 10% penalty.
  • Documentation and recordkeeping:
    • Taxpayers must submit with their state return: account statements showing contributions/earnings, the account’s Form 1099, and, upon withdrawal, receipts proving eligible child care spending.
    • Records for each account must be retained for at least four years.
  • Rulemaking: Treasurer may adopt implementing rules, but rules may not impose new administrative/reporting burdens on financial institutions.

Who is affected

  • Families and individuals who pay for child care (especially those anticipating future child care needs).
  • Financial institutions that offer savings accounts — allowed but not required to track or designate accounts.
  • Department of Treasury (program administration, forms, audits) and state revenue (tax expenditure from exemptions/deductions).
  • The companion bill (HB 4057) will determine the specific income‑tax deduction structure and any dollar limits.

Procedural / timeline notes

  • Program provisions take effect for accounts beginning January 1, 2026.
  • HB 4056 was introduced and referred to the relevant committee (Economic Competitiveness); enactment depends on legislative action and any changes through HB 4057 which is tied to the tax treatment.

Potential impacts

  • Reduces state taxable income for participating taxpayers (extent depends on deduction limits in HB 4057).
  • Encourages saving specifically for child care; could increase administrative activity for Treasury (forms, compliance checks).
  • Financial institutions have limited new obligations under the bill, minimizing industry compliance burdens.

Compiled from official sources — confirm details with the bill’s official record.

Sign in to ask a question.