Child Care Tax Incentive Act of 1988

Child Care Tax Incentive Act of 1988 - Amends the Internal Revenue Code to increase from 30 to 40 percent the percentage used to determine the dependent care income tax credit for employment-related expenses in connection with non-handicapped taxpayer dependents under age 15. Reduces the credit (but not below 20 percent) when adjusted gross income exceeds $10,000. Disallows government-subsidized child care expenses in credit calculations.

Directs the Secretary of the Treasury to prescribe tables to permit credit payments by employers through payroll withholding mechanisms.

Treats 70 percent of the 30 percent dependent care credit for taxpayers with adjusted gross income of $40,000 or less as a refundable credit, administered through the earned income credit.