Oregon Working Family Household and Dependent Care Credit

Quick Facts

• Benefit type: Refundable Oregon income tax credit that covers a portion of dependent care expenses so parents and caregivers can work or attend school.
• Maximum credit: Up to 60% of qualifying expenses, capped at $3,000 per qualifying individual and $6,000 per household.
• Who qualifies: Oregon residents with earned income who paid for childcare or dependent care so they could work, seek work, or attend school, and whose household income falls below state median income or who receive certain public benefits.
• How to claim: File Schedule OR-WFHDC with your Oregon Form OR-40. Many claimants also qualify for the federal Child and Dependent Care Credit; you can claim both.
• Why it matters: Oregon has among the highest childcare costs in the country. The credit delivers cash back, helping families cover daycare, afterschool programs, summer camps, and adult day services.

Program Overview

The Working Family Household and Dependent Care Credit (WFHDC) evolved from Oregon’s former Working Family Household and Child Care Credit. Legislators redesigned the benefit in 2022 to target lower- and moderate-income households while maintaining full refundability. Unlike the federal credit, which becomes nonrefundable for higher incomes, Oregon’s credit pays out even if you owe no tax, making it especially valuable for hourly workers and students.

The credit applies to a broad range of care arrangements, including licensed daycare centers, in-home providers, nannies, preschool programs, afterschool enrichment, day camps, and adult day services for disabled dependents. Expenses must enable the taxpayer (and spouse, if filing jointly) to work, seek employment, or attend school at least part-time.

Eligibility Requirements

1. Residency: You must be an Oregon resident for the entire tax year. Part-year residents cannot claim the credit.
2. Earned income: You (and your spouse, if filing jointly) must have earned income from wages, self-employment, or certain disability payments. If one spouse is a full-time student or disabled, special rules apply.
3. Qualifying dependents: Dependents must be under 13 for at least part of the year, or any age if physically or mentally incapable of self-care. Dependents must live with you more than half the year.
4. Care expenses: Costs must be incurred so you can work or attend school. Eligible expenses include provider fees, registration costs, transportation provided by the care program, and certain nanny payroll taxes. Payments to your spouse, child under 19, or dependent do not qualify.
5. Income limit: Household income must be at or below the statewide median (around $65,000 for a family of four; updated annually). Alternatively, households receiving SNAP, TANF, or Employment Related Day Care (ERDC) benefits automatically qualify regardless of income.
6. Provider requirements: Care must be provided by individuals or organizations authorized to work in the U.S. Providers must furnish their taxpayer identification number (TIN). Oregon encourages providers to be listed with the Department of Human Services, but licensing is not always mandatory (e.g., certain relative care).

Benefit Calculation

The credit reimburses a percentage of qualifying expenses based on income tiers. For 2024, percentages range from 60% for the lowest-income households to 8% for those near the income ceiling. Calculate as follows:

1. Determine total qualifying expenses (up to $3,000 per dependent, $6,000 per return).
2. Identify your household income and applicable percentage from the WFHDC table in the instructions.
3. Multiply expenses by the percentage to find your credit.

Example

• Family with two children: The Garcias spend $12,000 on childcare. Only $6,000 counts (two dependents × $3,000). Their household income of $42,000 corresponds to a 40% credit. Credit = $6,000 × 40% = $2,400.
• Single parent student: Jada earns $22,000 and pays $4,500 for afterschool care. Percentage = 60%. Credit = $4,500 × 60% = $2,700. Because the credit is refundable, she receives the full amount even with minimal tax liability.
• Household near the cap: The Nguyens earn $64,000 and pay $7,000 for daycare. Only $6,000 qualifies; their percentage is 8%. Credit = $480. They may still claim the federal credit for additional relief.

Interaction with Federal Credits and Benefits

• Federal Child and Dependent Care Credit: Claiming the federal credit does not reduce your Oregon credit. Use the same expense figures but adhere to each program’s rules.
• Dependent Care FSA: If your employer offers a dependent care flexible spending account, subtract FSA reimbursements from expenses before calculating the credit.
• Employment Related Day Care (ERDC): Households receiving ERDC subsidies can claim out-of-pocket costs not covered by ERDC.
• Earned Income Tax Credit (EITC): The WFHDC can be combined with the Oregon EITC for additional refunds.

Application Process

1. Track expenses: Keep invoices, receipts, and proof of payment (bank statements, canceled checks) for each provider.
2. Collect provider information: Obtain the provider’s name, address, and TIN. Use Form WFHDC-Prov to request details if needed.
3. Complete federal Form 2441: Even though Oregon’s credit is separate, you must complete federal Form 2441 to determine qualifying expenses.
4. Fill out Schedule OR-WFHDC: Enter qualifying expenses, percentage, and calculated credit. Attach the schedule to your Oregon return.
5. File by the deadline: Submit with your Oregon tax return by April 15 (or the extended date). E-filing speeds processing and reduces errors.
6. Retain records: Oregon may request proof of expenses or provider info for up to three years.

Documentation Checklist

• Receipts or invoices showing provider name, dates of service, and amount paid.
• Bank statements or canceled checks verifying payment.
• Provider taxpayer identification numbers (TINs).
• Proof of earned income (W-2s, 1099s).
• School enrollment verification if you or your spouse were students.
• Documentation of public assistance participation (SNAP/TANF/ERDC) if using that pathway.

Strategies to Maximize the Credit

1. Leverage eligible expenses: Include application fees, registration deposits, and transportation costs billed by the provider. These often get overlooked.
2. Coordinate with FSAs: If you contribute to a dependent care FSA, plan expenses so you maximize both the FSA exclusion and the refundable credit without double-counting.
3. Use licensed providers when possible: Licensed providers typically supply documentation promptly, simplifying audits.
4. Track part-year care: If your child turns 13 mid-year, expenses before the birthday qualify. Keep detailed records by month.
5. Adjust estimated taxes: Expecting a large refund? Adjust withholding or estimated taxes to keep more cash during the year while still receiving the credit.

Common Mistakes

• Missing provider TINs: Without a TIN, Oregon may disallow the expense. Request the information early.
• Including overnight camp costs: Overnight camps do not qualify. Day camps and summer day programs do.
• Claiming payments to relatives under 19: Payments to your child under age 19 or anyone you claim as a dependent do not qualify.
• Incorrect income calculations: Use Oregon’s definition of household income, which may include nontaxable Social Security or workers’ compensation.
• Forgetting to subtract FSA reimbursements: Only out-of-pocket expenses qualify.

Example Scenarios

• Dual-income family with infant: The Thompsons pay $1,200 monthly for infant care ($14,400 annually). After subtracting $5,000 reimbursed by a dependent care FSA, $9,400 remains. Only $3,000 counts per child, so they claim $3,000. With household income $58,000, their percentage is 20%; credit = $600.
• Caregiver for disabled adult: Marcus cares for his adult sister who has a developmental disability. He pays $5,000 for adult day services so he can work full time. Income is $30,000, percentage 48%. Credit = $2,400.
• Seasonal worker: Alisha works seasonally and pays for childcare during the summer months. Even though she does not work year-round, expenses incurred during working months qualify. She documents work schedules and pays stub copies to substantiate eligibility.

Frequently Asked Questions

• Can part-year residents claim? No. You must be an Oregon resident for the full year.
• What if my provider refuses to provide a TIN? Report the provider and document your request. Oregon may allow the expense if you show due diligence, but results vary. Consider switching providers next year.
• Do preschool tuition payments count? Yes, if the primary purpose is care enabling you to work, even if educational components are included.
• Can I claim expenses for a nanny paid in cash? Yes, but you must comply with employment tax rules and provide the nanny’s SSN. Maintain payroll records.
• How long until I receive the refund? E-filed returns with direct deposit typically process in 4–6 weeks, but the Department may delay refunds for verification.

Additional Resources

• Oregon Department of Revenue WFHDC
• Schedule OR-WFHDC Instructions
• Child Care Resource & Referral of Oregon
• Employment Related Day Care (ERDC) Program
• IRS Publication 503 – Child and Dependent Care Expenses