The Scotland Bill is to give Holyrood control over several areas of welfare, as well as income tax rates and bands.
Speaking to party activists in Glasgow, Ms Dugdale proposed using the new powers to help groups including carers and new mothers from poor backgrounds.
The Scottish government will outline its proposals for welfare on Tuesday.
In her speech, Ms Dugdale set out key changes she plans to make to the welfare system, and stated that Scotland "can and must" do things differently to the Conservative government at Westminster.
A range of benefits including the Carer's Allowance, benefits for people with disabilities like the Disability Living Allowance, Personal Independence Payment and Attendance Allowance, and other benefits which are targeted at low-income households such as maternity grants and funeral payments will be devolved in the Scotland Bill.
Ms Dugdale said: "Unlike any previous election, it will not be the constitution which is the centre of this Scottish election but rather how we use our powers. 2016 will be the first Scottish tax and spend election.
"Scottish Labour will never look for an excuse not to act. We will use the new powers we hold and grasp with both hands the possibilities they provide."
Her proposals included:
She said that raising the level of Carer's Allowance to match the level of Jobseeker's Allowance would be worth about £600 a year extra to carers, which would "help to tackle poverty amongst a group in society who give so much to others."
Ms Dugdale also said that the Sure Start maternity grant has been set at £500 for 14 years, while the cost of having a baby has increased.
"We would bring it more up to date by more than doubling it to £1,030, helping families with the average cost of a cot, buggy, car seat and nappies for a year", she will pledge.
The Scottish government said at the weekend that it wanted to reduce the stress of applying for benefits when new welfare powers are devolved.
Social Justice Secretary Alex Neil also said SNP ministers would be looking to remove the stigma that can be attached to claiming social security.
Just over 15% of welfare spending north of the border will be devolved, the Scottish government has said, with the legislation also giving the parliament in Edinburgh the power to create new benefits and top up existing payments.
Mr Neil will use a debate on Tuesday to set out the key principles that he argues will underpin the Scottish government approach to welfare - that social security is an investment in the people of Scotland, with respect for the individual at the heart of the system.
Also at the weekend, Scottish Lib Dem leader Willie Rennie told his party's spring conference that he would put forward a "big, bold agenda" for change in the run-up to the election on 5 May.
He pledged the party's policies - including plans to raise £475m for education by increasing the income tax rate in Scotland by 1p - would make the country "fit for the future".
Changes to drug policy which aim to treat addiction as a health issue rather than a criminal justice problem will also be included in its manifesto, along with plans to put the treatment of mental health problems on an equal standing in law with physical ill health.
The Lib Dems also want more NHS funds to go to GPs in a bid to address recruitment issues, and say councils should have the power to set local taxation.
Scottish Conservative leader Ruth Davidson said the new devolved powers would allow the Scottish government to make "real choices" about the level of benefits in Scotland.
She added: "We are glad to see Labour finally catching up with my call last year for an increase in the Carers' Allowance - which we believe is the right thing to do.
"However, all political parties need to be sure there is a fair balance between helping people who need our support, as well as the taxpayers who fund it.
"That means that when these new welfare powers are devolved, we will press the SNP to support a welfare system that provides a safety net, but one which also helps people back into work - which will always be the best route out of poverty."
The Scottish Parliament vote in May will be Scotland's first "tax and spend" election, Scottish Labour leader Kezia Dugdale has argued.