Sponsors (10)
The bill increases and indexes the employer-provided dependent care exclusion to help many working parents and stabilize benefits over time, but it reduces federal revenue, disproportionately helps those with employer plans rather than low-income or uninsured families, and creates near-term administrative costs.
Parents and families can exclude up to $10,000 of employer-provided dependent care assistance from taxable income ($5,000 for separate returns), lowering their federal tax burden.
Taxpayers (particularly working parents) benefit from indexing the exclusion to inflation, which preserves the real value of the tax break over time and prevents gradual erosion.
Employers and payroll administrators get a clear, permanent statutory limit and indexing rule, reducing year-to-year uncertainty for plan design and payroll withholding.
Taxpayers overall: the higher exclusion reduces individual taxable income and may lower federal revenue, which could increase pressure on other taxes or spending priorities.
Low-income and unemployed families are less helped because the indexed higher cap mainly benefits workers with employer-sponsored dependent care plans, increasing equity concerns.
Employers and federal agencies will face one-time administrative and IT costs to update payroll systems and guidance to implement the new cap and indexing rules.
Based on analysis of 2 sections of legislative text.
Raises the tax exclusion for employer-provided dependent care to $10,000 ($5,000 for separate filers) and indexes the amounts for inflation.
Introduced January 15, 2025 by Stephanie I. Bice · Last progress January 15, 2025
Increases the tax exclusion for employer-provided dependent care benefits so employees can exclude up to $10,000 of such assistance from taxable income ($5,000 for separate filers), and indexes those dollar limits for inflation. The change applies to calendar years beginning after December 31, 2024, and also removes an obsolete 2021 special‑rule provision.