Child and Dependent Care Tax Credit Enhancement Act of 2025

This bill increases and updates the Child and Dependent Care Tax Credit so families can get more help with child care or care for a dependent. It also lets many families receive the credit even if they owe no income tax, as long as their main home is in the U.S. for more than half the year.

Key points

• Credit size: The credit rate is up to 50% of eligible care costs. It starts to go down once income is above $125,000, dropping by 1 percentage point for each $2,000 of income. It does not go below 20% until income is above $400,000, and then it keeps dropping as income rises.
• Eligible expenses: You can count more care costs toward the credit—raised from $3,000 to $8,000 for one qualifying person, with a higher cap for two or more people.
• Refundable for many families: If your main home is in the U.S. for more than half the year, you can get the credit even if you owe no income tax.
• Married filing separately: Couples who file separate returns must coordinate their claims and, together, cannot get more than they would have received on a joint return.
• Inflation updates: Starting in 2026, the income thresholds and dollar limits will adjust each year for inflation.
• When it starts: These changes apply to tax years beginning after December 31, 2024 (the 2025 tax year).