Child and Dependent Care Tax Credit Enhancement Act of 2025

This bill would make child and dependent care more affordable by expanding the Child and Dependent Care Tax Credit. Families could claim up to 50% of eligible care costs if their income is $125,000 or less, with the credit gradually shrinking as income rises. It stays at least 20% for most families until around $400,000 of income, then phases out fully by about $440,000. It also raises the cap on care expenses you can count per person from $3,000 to $8,000. The credit would be refundable for people who lived in the U.S. more than half the year, meaning you could get money back even if you owe no income tax. Key income and dollar amounts would adjust for inflation starting in 2026.

• Who is affected: People who pay for child or dependent care so they can work or look for work.
• What changes: Higher percentage of costs covered (up to 50%), higher per-person expense cap ($8,000), refundable credit for many households, and yearly inflation updates; special rules ensure married couples filing separately can’t claim more than if they filed jointly .
• When: Applies to tax years beginning after December 31, 2024 (the 2025 tax year).