Sponsors (8)
The bill raises the dependent care exclusion to give working caregivers more take-home pay and stronger employer benefits, at the cost of reduced federal revenue and uneven benefit distribution that favors those with sufficient income or employer plans.
Parents, employees, and families: the dependent care exclusion rises from $7,500 to $10,500, lowering taxable income for many working households that pay for child or elder care and increasing their take-home pay.
Workers using employer-provided dependent care assistance: will retain more pre-tax benefit value (effectively higher after-tax compensation) when they have qualifying care expenses.
Employers (especially small employers): the larger exclusion makes dependent care benefits relatively more valuable, which can help recruitment and retention for employees with caregiving responsibilities.
Lower-income families and those without access to employer pre-tax benefits: may receive little or no benefit because the exclusion primarily helps taxpayers with sufficient earnings or access to employer plans.
Taxpayers/general public: increasing the exclusion reduces federal tax receipts and could modestly raise the deficit or crowd out other spending unless offset by revenue or cuts elsewhere.
Employers (especially small employers): will face administrative and payroll adjustments to implement the new limit, creating compliance costs and short-term implementation burden.
Based on analysis of 2 sections of legislative text.
Raises the tax exclusion for employer-provided dependent care from $7,500 to $10,500 (separate filers limited to half) for payments in calendar years after enactment.
Introduced September 23, 2025 by Kim Schrier · Last progress September 23, 2025
Increases the tax-free limit for employer-provided dependent care assistance under the Internal Revenue Code by raising the exclusion amount from $7,500 to $10,500 (with the married-filing-separately limit set at half that amount). The change applies to amounts paid or incurred in calendar years beginning after enactment and is intended to make employer-dependent care benefits more valuable to working families.