The Child Care Availability and Affordability Act makes several changes to tax benefits related to child care and dependent care expenses. First, it expands the employer-provided child care credit by doubling the credit rate from 25 percent to 50 percent and raising the maximum credit amount from $150,000 to $500,000 annually, with an even higher limit of $600,000 for small businesses. Second, it increases the amount families can exclude from income under dependent care assistance programs from $5,000 to $7,500 per year ($2,500 to $3,750 for married couples filing separately). Third, and most significantly, the bill replaces the existing child and dependent care credit with a new, refundable credit that allows families to claim up to 50 percent of qualifying child care expenses (with the percentage declining as income increases, but never below 35 percent), up to $5,000 annually for one child or $8,000 for multiple children. These changes take effect immediately upon enactment, allowing employers and working families with child care responsibilities to receive greater financial support.
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