Sponsors (22)
The bill increases tax-based support for dependent and household care—boosting refundable credits, expanding employer incentives, and raising exclusions to lower out-of-pocket costs and encourage work—while shifting costs to the federal budget, concentrating some benefits among larger employers and higher-income employees, and adding administrative and eligibility burdens that may exclude informal caregivers.
Low- and moderate-income parents and caregivers can receive a refundable credit covering up to 50% of qualifying household and dependent care expenses (up to $5,000 for one dependent, $8,000 for multiple), directly lowering out-of-pocket care costs and helping caregivers work.
Employers are given stronger incentives to provide or partner on childcare (credit calculation increased, 50% of qualified expenditures count, and the per-taxpayer cap raised), which could expand employer-provided or employer-supported childcare options for employees.
Employees who receive employer-provided dependent care can exclude up to $7,500 of assistance from taxable income, increasing take-home pay for working caregivers and making employer benefits more generous for recruitment and retention.
Expanded credits and exclusions across the bill reduce federal tax revenue and could increase the deficit or require offsets, affecting federal spending priorities and all taxpayers.
Large caps and employer-focused credits may concentrate benefits among larger employers and higher-income employees who already receive employer-sponsored care, limiting help for lower-wage workers at employers who don't offer such programs.
New and expanded tax provisions create additional administrative and compliance burdens for employers, payroll administrators, the IRS, dependent care centers, and families (changes to eligibility lookbacks, substitution rules, plan updates, provider certifications).
Based on analysis of 4 sections of legislative text.
Doubles employer child care credit, raises employee dependent care exclusion to $7,500, and creates a refundable employment-related dependent care credit with income-based phasedown.
Official title: Amend the Internal Revenue Code of 1986 to expand the employer-provided child care credit and the dependent care assistance exclusion.
Introduced March 4, 2025 by Katie Boyd Britt · Last progress March 4, 2025
Expands federal tax support for child care by increasing employer child care tax credits, raising the tax-free dependent care exclusion for employees, and creating a new refundable credit to help pay for household and dependent care so taxpayers can work. The changes boost credit rates and maximums, give extra benefits to small businesses, and scale the new refundable credit by income so lower- and moderate-income households get the largest shares. The bill takes effect for amounts paid or incurred after enactment and focuses on tax incentives to increase child care availability and reduce out-of-pocket care costs for working families and employers who provide child care benefits.