HOME-BASED CHILD CARE INCOME TAX CREDIT

HB0106

HOUSE BILL 106

57th legislature - STATE OF NEW MEXICO - second session, 2026

INTRODUCED BY

Mark Duncan
and
Luis M. Terrazas

AN ACT

RELATING TO TAXATION; CREATING THE HOME-BASED CHILD CARE INCOME
TAX CREDIT.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

SECTION 1.
A new section of the Income Tax Act is enacted
to read:

"[
NEW MATERIAL
] HOME-BASED CHILD CARE INCOME TAX CREDIT.--

A. A taxpayer who files an individual New Mexico
income tax return, is not a dependent of another individual and
does not enroll the taxpayer's dependent child in a state-funded or private child care facility or a state-funded or
private pre-kindergarten program may claim a credit against the
taxpayer's tax liability imposed pursuant to the provisions of
the Income Tax Act. The credit authorized pursuant to this
section may be referred to as the "home-based child care income
tax credit".

B. Except as provided in Subsection D of this
section, the amount of credit shall be in the amount of one
thousand dollars ($1,000) per month for each month the
dependent child is not eligible to enroll in public school.

C. A taxpayer shall apply for certification of
eligibility for the tax credit from the early childhood
education and care department on forms and in the manner
prescribed by that department. Except as provided by
Subsection F of this section, only one tax credit shall be
certified per dependent child not enrolled in a state-funded or
private pre-kindergarten program per month. The early
childhood education and care department may issue rules
governing the procedure for administering the provisions of
this subsection. The early childhood education and care
department shall provide the department with the certificates
of eligibility issued pursuant to this subsection in an
electronic format at regularly agreed-upon intervals.

D. For the 2027 taxable year and each subsequent
taxable year, the amount of credit provided in Subsection B of
this section shall be adjusted to account for inflation. The
department shall make the adjustment by multiplying the credit
amount by a fraction, the numerator of which is the consumer
price index ending during the prior taxable year and the
denominator of which is the consumer price index ending in tax
year 2025. The result of the multiplication shall be rounded
down to the nearest one dollar ($1.00), except that if the
result would be an amount less than the corresponding amount
for the preceding taxable year, then an adjustment shall not be
made.

E. That portion of the home-based child care income
tax credit claimed by a taxpayer that exceeds the taxpayer's
income tax liability in the taxable year in which the home-based child care income tax credit is claimed shall be refunded
to the taxpayer.

F. Married individuals who file separate returns
for a taxable year in which they could have filed a joint
return may each claim only one-half of the home-based child
care income tax credit provided in this section that would have
been allowed on a joint return.

G. The credit provided by this section shall be
included in the tax expenditure budget pursuant to Section
7-1-84 NMSA 1978, including the total annual aggregate cost of
the credit.

H. As used in this section, "dependent child" means
a child who:

(1) is a "dependent" as defined by Section 152
of the Internal Revenue Code of 1986, as that section may be
amended or renumbered, but also includes any minor child or
stepchild of the taxpayer who would be a dependent for federal
income tax purposes if the public assistance contributing to
the support of the child or stepchild was considered to have
been contributed by the taxpayer; and

(2) is age five or younger."

SECTION 2.
APPLICABILITY.--The provisions of this act
apply to taxable years beginning on or after January 1, 2026.

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