This bill expands tax credits and deductions to make child care more affordable for working families and to encourage employers to offer child care benefits. For employers, it roughly doubles the child care credit from 25 percent to 50 percent of qualified child care expenses, raises the maximum credit from $150,000 to $500,000, and allows small businesses to claim even higher percentages (60 percent) and amounts ($600,000). For workers, the bill increases the amount families can exclude from taxes for dependent care assistance programs from $5,000 to $7,500, and it creates a new tax credit for household and dependent care expenses that varies from 35 to 50 percent depending on income level, with annual limits of $5,000 for one child and $8,000 for two or more children. These changes take effect immediately upon enactment and are designed to help working parents—particularly lower and middle-income families—afford child care while giving employers incentives to support their employees' child care needs.
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