Child Care Gets a Makeover: Bill Boosts Funding, Axes Tax Credit

The "Respect Parents Childcare Choices Act" is shaking up the way the government handles childcare. The core idea? More money for childcare assistance, but with some big changes to how it's delivered and who can benefit. It also completely eliminates a popular tax credit, changing the financial equation for many families.

Dollars and Decisions

The bill pumps up the Child Care and Development Block Grant (CCDBG) with a hefty $14 billion per year from 2026 to 2031. But it's not just about more money; it's about how that money is used. The bill pushes states to give parents "child care certificates" – basically, vouchers – that they can use with a wider range of providers, including relatives and religious organizations. In fact, 90% of direct service funds must go through these certificates, up from 70%.

Think of it like this: Grandma wants to watch the kids, and now she can potentially get paid for it, as long as she meets income and work requirements. The bill even says states have to pay relative caregivers at least 75% of what they pay family childcare providers. But it also means potentially less money for other types of childcare programs that don't use certificates.

Who's In, Who's Out?

Eligibility is getting tweaked, too. There's a $1 million asset limit for families. Income thresholds also change based on marital status and how many parents or caregivers are working. Plus, if you get married or see a pay bump, the bill says states can't kick you off assistance for at least six months. The bill also mandates that states inform parents about the option of using relatives, including grandparents, siblings, aunts or uncles. (Section 2).

The Tax Credit Trade-Off

Here's the kicker: the bill repeals Section 21 of the Internal Revenue Code. That's the tax credit many families use for household and dependent care expenses. For some, this could mean a higher tax bill. The bill updates several other sections of the tax code (Sections 23, 35, 129, 213, and 6213) to reflect this change. The changes come into play for tax years starting after the bill is enacted.

Faith-Based Focus

The bill makes several changes around religious childcare providers. It replaces "sectarian" with "religious" in several places and adds language protecting these providers from what it calls "undue burdens." It also clarifies that child care certificates used at religious providers aren't considered grants or contracts. (Section 2)

Pilot Programs and Paperwork

The bill also sets up two $50 million pilot programs: one to tackle fraud and another to promote childcare provided by relatives. And there's a requirement for a report on regulations that might be keeping family members from stepping up as caregivers. (Section 2)

Bottom Line

This bill represents a significant shift in how the government approaches childcare. It prioritizes parental choice and expands options, especially for those who prefer relative or religious care. However, by eliminating the dependent care tax credit, it could also increase the financial burden on some families. It's a trade-off, and whether it's a good one depends on your individual circumstances and priorities.