Credits and breaks for California families: CalEITC, the Young Child credit, $491 a dependent

A California family’s return has two layers of credits, and which layer you are in depends on earned income. Below roughly $33,000, the state’s refundable credits take over: the California Earned Income Tax Credit, figured on its own table on Form FTB 3514 and worth up to $3,756 for three or more children (2025 figure; 2026 to come), plus the Young Child Tax Credit of up to $1,189 for a child under 6, plus a Foster Youth Tax Credit for former foster youth 18 to 25. These are paid out in cash even to a family that owes no tax, and they go to workers with an ITIN and to childless adults 18 and over, neither of whom the federal credit covers. Above that line the refundable credits are gone and the family’s breaks are all nonrefundable: a $491 exemption credit for each dependent, $158 for each parent, a child and dependent care credit worth 50%, 43% or 34% of a recomputed federal credit until federal AGI passes $100,000, and a $120 renter’s credit for renters under $111,660 of AGI. There is no general California child tax credit, no deduction for 529 contributions, and no credit for tuition at any level.

Because the Franchise Tax Board, the Department from here on, starts Form 540 from federal AGI, the federal child tax credit, the federal child care credit and the federal dependent care exclusion do not flow into California. The state computes its own versions, and in two cases, the care credit and the dependent care exclusion, it kept the pre-2026 federal rules when Congress enlarged them.

The refundable credits: CalEITC and its companions

The CalEITC is not 20% or 30% of the federal credit. It has its own schedule, published each year with Form FTB 3514, and its own rules, most of them broader than the federal ones.

All three allow an ITIN in place of a Social Security number for the taxpayer, spouse and children. Investment income must be $3,400 or less, a limit the legislature fixed in 2026 so that federal changes cannot move it. The credits phase in and out across the income range; the exact amount for a given income comes from the FTB 3514 table or the Department’s online calculator, and the 2026 table is not out yet.

Two features matter in practice. The $32,900 ceiling is on earned income, not AGI, so a family with wages of $30,000 and $5,000 of unemployment still qualifies for the CalEITC on the wages, and the unemployment is not even California income. And the Young Child Tax Credit has a door the CalEITC does not: a parent with no earned income at all, or a self-employed parent with a net loss, can still receive it if wages and the loss stay under the limit.

Dependents: a $491 credit, not a deduction

California gives $491 for each dependent claimed on Form 540 for 2026, as a nonrefundable credit against the tax. It is the same $491 at every income level until federal AGI passes $252,203 single, $378,310 head of household or $504,411 joint (2025 thresholds; 2026 to come), where it shrinks by $6 per $2,500 of excess, $12 per $2,500 on a joint return. A family of four with ordinary income gets $1,298 of exemption credits, and for many such families that is the whole California tax. Set against the $2,200 federal child tax credit per child it is small, and unlike the federal credit it has no refundable portion and no age-17 cutoff: a 20-year-old college student who is still a dependent earns the same $491 as a toddler.

Child and dependent care: three tiers and a cliff

The California Child and Dependent Care Expenses Credit on Form FTB 3506 is a percentage of a federal credit that is itself recomputed on the California form. The form applies the old federal percentages, 35% for AGI up to $15,000 falling to 20% above $43,000, to qualified expenses capped at $3,000 for one qualifying person and $6,000 for two or more, then multiplies by California’s share: 50% if federal AGI is $40,000 or less, 43% from $40,001 to $70,000, 34% from $70,001 to $100,000, and nothing above $100,000. The care must be provided in California, both spouses must have earned income (or be a full-time student or disabled), and the provider’s name, address and tax ID go on the form. The credit is nonrefundable. For a family at $90,000 of AGI with two children in care, the arithmetic is 20% of $6,000, or $1,200, times 34%, or $408. At $100,001 of AGI it is zero.

The 2026 federal act raised the federal percentages and the dependent care FSA limit to $7,500. California did not follow either change. The FTB 3506 computation uses the older federal table, and the California exclusion for employer dependent care benefits stays at $5,000, so an employee who runs $7,500 through a dependent care FSA in 2026 adds $2,500 back to California wages on Schedule CA.

Head of household: Form FTB 3532

California uses the federal head of household rules but requires its own attachment, Form FTB 3532, with the qualifying person’s name, relationship and months in the home. Without it the Department denies the status and recomputes the return as single, with the single standard deduction and single brackets. Head of household gets the $11,800 standard deduction and brackets that fall between single and joint. Two credits ride on it. The joint custody head of household credit, 30% of net tax up to $610 (2025 figure; 2026 to come), is for a parent who does not qualify as head of household in the usual way but had the child for between 146 and 219 nights under a custody agreement. The senior head of household credit, for a filer 65 or older whose qualifying person has died, is covered in California for retirees.

School, college and 529 plans: nothing

California has no K-12 credit, no college tuition credit and no deduction for contributions to ScholarShare 529 or any other state’s plan. The federal American Opportunity and Lifetime Learning credits do not carry over, because California has no equivalent line. The student loan interest deduction does carry over, because it is above the AGI line. On 529 plans California is stricter than the IRS: it never adopted the federal expansions that allow tax-free withdrawals for K-12 tuition, apprenticeships, more kinds of postsecondary credentials or rollovers to a Roth IRA. A $10,000 withdrawal for private school tuition that is tax-free federally is taxable in California on its earnings portion, plus a 2.5% additional tax, reported on Schedule CA line 8z. The same is true of the new federal “Trump accounts” for children: employer contributions are California wages, and the accounts have no California status (a 2026 law may now follow the federal rules for these accounts; verify).

Smaller items

• Renter’s credit. $60 single, $120 joint and head of household (a 2025 law raises these to $250 and $500 only in a year the budget funds it; check the 2026 instructions), nonrefundable, for a renter of a California principal residence for at least six months with AGI of $55,830 single or $111,660 joint or less. Claimed on Form 540 with no attachment.
• Adoption credit. 50% of the cost of adopting a child from a California public agency, up to $2,500 per child, nonrefundable with a carryover.
• A child’s investment income. California has its own kiddie tax, Form FTB 3800, for a child with more than $2,700 of unearned income (2025), and a parent’s election on Form FTB 3803 to report a child’s interest and dividends between $1,350 and $13,500 on the parent’s return.
• Alimony and child support. Child support is never income. Alimony under an agreement signed 2019 through 2025 is still deducted by the payer and taxed to the recipient in California, through adjustments on Schedule CA; agreements signed after December 31, 2025 follow the federal rule and are ignored on both returns.
• Health coverage. A family that goes without coverage for a month pays the Individual Shared Responsibility Penalty on Form FTB 3853, which has no federal counterpart any more; coverage exemptions are claimed on the same form.