Establishes a childcare provider startup credit allowing qualified taxpayers to claim a credit equal to 30% of their qualified childcare startup expenses, with a maximum credit of $10,000.
Defines “qualified taxpayer” as one providing childcare services to at least two children and complying with state or local regulations.
Specifies “qualified childcare startup expenses” as costs incurred within two years to establish and operate a childcare service.
Introduces an increase and refundability for the household and dependent care credit, allowing individuals to claim a credit for employment-related expenses.
Sets the applicable percentage for the credit at 50%, reducing to a minimum of 35% based on the taxpayer’s adjusted gross income exceeding $15,000.
Defines qualifying individuals for the credit, including dependents under age 13 and individuals who are physically or mentally incapable of self-care.
Caps the amount of employment-related expenses eligible for the credit at $7,500 for one qualifying individual and $15,000 for two or more.
Implements an earned income limitation for the credit, ensuring it does not exceed the taxpayer’s earned income.
Provides for inflation adjustments to the dollar limits starting in 2025.
Includes special rules for married couples, students, and payments to related individuals regarding eligibility for the credit.
Repeals the existing household and dependent care credit provisions and replaces them with the new structure outlined in the legislation.
