Senate advances new $500 child tax credit

Rep. Greg Walker holds up a report of child well being in Indiana while speaking Feb 20 about his bill to create a newborn tax credit. (IBJ Photo / Cate Charron)

The Indiana Senate unanimously advanced a bill last week to create an income tax credit for families with new children.

Under Senate Bill 497, most families would be eligible for a $500 returnable credit per child born, adopted or fostered. The credit must be used in the first year the parents can claim their newborn as a dependent on their tax return.

SB 497, which has bipartisan support, centers one of several demographics lawmakers are targeting with tax relief measures. Senate Bill 1 includes relief for other groups such as seniors, disabled veterans and new homeowners.

SB 497 requires a household income of less than 720% of the federal poverty level. For a family of four, they would need to make under $225,000 a year to use the credit.

Indiana’s standard dependent child deduction is $1,500. In 2023, the Legislature allowed families to double that deduction one time for a child born after that tax year. Hoosiers would be able to include the new credit in their 2025 tax return if the bill is enacted.

Currently, the bill has an overall cap of $10,000 worth of credits, meaning only about 20 families could take advantage of it. The Senate Tax and Fiscal Policy Committee added this measure to the bill “to keep the bill moving from an appropriations standpoint,” chair Sen. Travis Holdman, R-Markle, said at a Feb. 11 meeting.

Essentially, by paring down the bill’s impact, it allows the legislation to stay alive so lawmakers could potentially find room for it in the budget.

The $10,000 maximum is a placeholder that bill author Sen. Greg Walker hopes to increase during Senate state budget discussions, according to a written statement from Senate Republicans Press Secretary Kristen Gorski, and he is hoping for the bill to be amended in the House.

“Sen. Walker is working to ensure a meaningful tax credit is passed and this bill will likely not become law unless this number is substantially increased,” Gorski said.

Walker, R-Columbus, said this tax credit is one of many measures lawmakers should consider to make it easier for Hoosiers to afford to have children.

Earlier this session, Walker joined Sen. Rodney Pol, D-Chesterton, at a press conference to advocate for legislation that prioritizes family building, including more paid leave and his newborn tax credit.

While urging his colleagues to vote for his bill, he referenced the 2025 Indiana Kids Count Data Book, which this year ranked Indiana 27th in the country for overall child well-being. He listed statistics—such as how families, on average, spend 11.2% of their annual income on child care—as evidence of a need to support young families.

“I hope this is not just a feel-good measure,” he said, “but this is something that we really need to consider.”

The availability of the credit will expire on Dec. 31, 2027, unless the legislature expands the timeline.

The bill now moves to the House for consideration.