Voters should care about this bill because the cost of childcare is a massive financial burden for many American families, often rivaling housing or college tuition expenses. If this bill becomes law, it would make childcare significantly more affordable, putting more money back into families' pockets. This could alleviate financial stress, potentially enable more parents to participate in the workforce or work more hours, and boost local economies as families have more disposable income.
If this bill does not become law, families will continue to struggle with high childcare costs, and the existing tax credit might not provide enough relief, especially for those with lower incomes or higher care expenses. The current system can discourage workforce participation due to the high net cost of working after childcare expenses are factored in. This bill aims to address these widespread financial challenges by providing direct and indirect tax relief.
KEY PROVISIONS
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PROVISION 01
Makes the Child and Dependent Care Tax Credit (CDCTC) fully refundable.
This allows lower-income families who may owe little or no tax to still receive the full credit as a cash refund, providing direct financial assistance.
PROVISION 02
Increases the maximum percentage of childcare expenses that can be claimed under the CDCTC from 35% to 50% for lower-income families, and raises the minimum percentage from 20% to 35%.
This significantly increases the amount of tax credit families can receive, making childcare more affordable across various income levels.
PROVISION 03
Increases the maximum amount an employee can exclude from their gross income for employer-provided dependent care assistance from $5,000 to $7,500.
This allows families to save more money on taxes by using pre-tax funds for dependent care expenses through their employer.
PROVISION 04
Adds annual inflation adjustments to the maximum expense amounts for the CDCTC and the employer-provided dependent care exclusion.
This ensures the value of these tax benefits keeps pace with the rising costs of living and dependent care over time.
Voters should care about this bill because the cost of childcare is a massive financial burden for many American families, often rivaling housing or college tuition expenses. If this bill becomes law, it would make childcare significantly more affordable, putting more money back into families' pockets. This could alleviate financial stress, potentially enable more parents to participate in the workforce or work more hours, and boost local economies as families have more disposable income.
If this bill does not become law, families will continue to struggle with high childcare costs, and the existing tax credit might not provide enough relief, especially for those with lower incomes or higher care expenses. The current system can discourage workforce participation due to the high net cost of working after childcare expenses are factored in. This bill aims to address these widespread financial challenges by providing direct and indirect tax relief.
KEY PROVISIONS
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high
Makes the Child and Dependent Care Tax Credit (CDCTC) fully refundable.
This allows lower-income families who may owe little or no tax to still receive the full credit as a cash refund, providing direct financial assistance.
high
Increases the maximum percentage of childcare expenses that can be claimed under the CDCTC from 35% to 50% for lower-income families, and raises the minimum percentage from 20% to 35%.
This significantly increases the amount of tax credit families can receive, making childcare more affordable across various income levels.
med
Increases the maximum amount an employee can exclude from their gross income for employer-provided dependent care assistance from $5,000 to $7,500.
This allows families to save more money on taxes by using pre-tax funds for dependent care expenses through their employer.
med
Adds annual inflation adjustments to the maximum expense amounts for the CDCTC and the employer-provided dependent care exclusion.
This ensures the value of these tax benefits keeps pace with the rising costs of living and dependent care over time.
Amendments for CDCTC refundability and enhancement, and increased employer-provided dependent care exclusion apply
taxable years beginning in a calendar year after 2026
Inflation adjustment for employer-provided dependent care exclusion begins
taxable years beginning after 2025
Inflation adjustment for CDCTC dollar amounts begins
GLOSSARY
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Child and Dependent Care Tax Credit (CDCTC)
A tax credit designed to help families offset the cost of care for children under 13 or dependents who are physically or mentally unable to care for themselves, so the taxpayer can work or look for work.
Refundable Tax Credit
A type of tax credit that can reduce a taxpayer's tax liability to below zero, meaning the taxpayer can receive the remaining amount of the credit as a cash refund check, even if they owe no taxes.
Employer-provided dependent care assistance
Benefits offered by an employer to help employees pay for dependent care expenses, often through a flexible spending account (FSA) where employees can set aside pre-tax money for these costs.
Gross income
The total amount of money earned by a person or company before taxes or deductions are taken out.
Internal Revenue Code (IRC)
The collection of federal tax laws in the United States, administered by the Internal Revenue Service (IRS).
Taxable year
The annual accounting period for keeping records and reporting income and expenses. For most individual taxpayers, this is the calendar year (January 1 to December 31).
Cost-of-living adjustment (COLA)
ACTION TIMELINE
2 EVENTS
APR 10, 25
Introduced in House
INTROREFERRAL
APR 10, 25
Referred to the House Committee on Ways and Means.
