The LITTLE Act of 2024 makes two main changes to federal tax law to help reduce childcare costs for families and support childcare providers. First, it creates a new tax credit for childcare providers who are starting a business, allowing them to claim 30 percent of their startup expenses up to a maximum of $10,000 across all years. Second, it significantly increases and makes refundable the existing dependent care tax credit, raising the credit from its current level to up to 50 percent of childcare expenses, with that percentage decreasing for higher-income families. Under the new rules, families can claim up to $7,500 in expenses for one child or $15,000 for two or more children, and the credit will be adjusted annually for inflation starting in 2025. The bill applies to tax years beginning after it is enacted and replaces the previous dependent care credit rules with an expanded, more accessible version designed to lower childcare costs for working families.
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