This bill increases the maximum allowable tax credits for both household and dependent care expenses claimed by individuals and for employer-provided child care benefits.
Ryan Mackenzie
Representative
PA-7
This bill amends the Internal Revenue Code to significantly increase the tax credits available for both families and employers related to dependent and child care expenses. Specifically, it doubles the maximum expense limits for the household and dependent care services credit claimed by individuals. Additionally, it raises the maximum credit amount available to employers for providing child care benefits from $\$150,000$ to $\$400,000$.
Child Care Tax Credit Doubles, Employer Benefit Cap Jumps to $400K: What It Means for Your Wallet
This legislation is a straight-up boost to the dependent care tax credit, essentially doubling the maximum amount of expenses you can claim when you file your taxes. Right now, if you’re paying for care for one kid or dependent, you can only count up to $3,000 in expenses toward the credit. This bill bumps that maximum eligible expense amount up to $6,000. If you have two or more qualifying people, the cap jumps from $6,000 to $12,000. This change is set to kick in for the tax year after the bill becomes law, meaning real savings for families juggling work and care costs.
The Direct Relief: Doubling Your Dependent Care Dollars
Let’s put this in real-world terms. The dependent care credit is one of those tax breaks that helps offset the brutal cost of daycare, nannies, or elder care, but the old limits felt like they hadn't been updated since the 90s. For a family spending $15,000 a year on two kids in daycare—which is pretty standard in many areas—the old $6,000 cap was barely a dent. By raising that cap to $12,000, the bill allows far more of those actual expenses to count toward your credit. This directly translates into a bigger refund or a lower tax bill for working parents, whether you’re a software engineer or a construction foreman. It’s a significant piece of financial relief aimed squarely at reducing the barrier of entry for parents trying to stay in the workforce.
Incentivizing Employers to Step Up
The bill also takes aim at the employer side of the equation by significantly increasing the credit available for companies that provide child care benefits. Currently, an employer can claim a maximum credit of $150,000 for expenses related to setting up or operating a child care facility for their employees. This legislation dramatically increases that maximum credit to $400,000 (Sec. 2).
This isn't just a win for big corporations. For mid-sized companies considering offering on-site daycare or subsidized care slots for employees, this increased credit makes the financial lift much easier. While it’s true that larger companies might be the first to benefit from the higher cap, the goal is to make these benefits more financially feasible across the board. If your employer is on the fence about offering a child care benefit, this change gives them a much stronger incentive to invest in you—and your kids. It’s a smart way to encourage businesses to help solve a major workforce problem.