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Amends section 129(a)(2) by replacing the dollar amount in subparagraph (A) and by striking and replacing subparagraph (D) to add an inflation-adjustment rule for the new amount.
Amends subsection (a)(2) to change the applicable percentage from '35 percent reduced (but not below 20 percent)' to '50 percent reduced (but not below 35 percent)'.
Redesignates section 21 as section 36C and relocates it from subpart A of part IV of subchapter A of chapter 1 to subpart C of part IV of subchapter A of chapter 1 immediately before section 37.
Amends multiple provisions of title 26 to update cross-references and internal citations, replacing references to 'section 21' with references to 'section 36C' and making related textual adjustments.
Amends paragraph (2) of section 1324(b) of title 31 by inserting additional text (text to be inserted is not shown in the section excerpt).
Inserts an item for section 36C into the table of sections for subpart C after the item relating to section 36B.
Amends the table of sections for subpart A by striking the item relating to section 21.
Moves and renumbers the Child and Dependent Care Tax Credit inside the Internal Revenue Code, updates code cross-references, increases the credit’s percentage limits and dollar limits (with automatic inflation adjustments and rounding rules), and raises the employer-provided dependent care exclusion from $5,000 to $7,500 with future inflation adjustments. All changes take effect for taxable years beginning after December 31, 2025.
The result: many working families who pay for child or dependent care will be eligible for larger federal tax benefits and employers can offer higher tax-free dependent care assistance; tax preparers, payroll systems, and the IRS will need to update forms and guidance to reflect the new section numbering and limits.
Referred to the House Committee on Ways and Means.
Introduced April 10, 2025 by Claudia Tenney · Last progress April 10, 2025