To amend the Internal Revenue Code of 1986 to increase the amount allowed as a credit under the expenses for household and dependent care services credit and the employer-provided child care credit.
- Bill Number
- H.R. 1426
- Origin Chamber
- House
- Congress
- 119th Congress, Session 1
- Policy Area
- Taxation
- Status
- Introduced
- Latest Action
- 2025-02-18: Referred to the House Committee on Ways and Means.
- Last Updated
- 2026-05-06T13:21:38Z
AI-Generated Summary
Purpose
This bill (H.R. 1426) aims to provide greater tax relief to families and employers by increasing the federal tax credits available for child and dependent care expenses. It seeks to make child care more affordable, supporting working parents and encouraging businesses to offer child care benefits.
Key Provisions
- Individual Child and Dependent Care Credit (Section 21 of the Internal Revenue Code):
- Doubles the maximum qualifying expenses eligible for the credit from $3,000 to $6,000 for one qualifying individual (e.g., a child or dependent needing care).
- Doubles the limit from $6,000 to $12,000 for two or more qualifying individuals.
- The credit is non-refundable (meaning it reduces taxes owed but doesn't provide a refund if it exceeds the tax bill) and is calculated as a percentage of eligible expenses, up to 35% for lower-income taxpayers.
- Employer-Provided Child Care Credit (Section 45F of the Internal Revenue Code):
- Increases the maximum amount of expenses eligible for the credit from $150,000 to $400,000 per year.
- This credit allows employers to claim 25% of qualified child care expenditures (or 10% for resource and referral services), with the higher cap applying to the total eligible costs.
- Effective Date: Both changes apply to tax years beginning after the date the bill is enacted into law.
Significant Changes to Existing Law
- The bill directly amends the Internal Revenue Code of 1986 by doubling the expense limits for the household and dependent care credit, which has remained largely unchanged since the 1990s (adjusted only for inflation in some cases).
- For the employer credit, it raises the expense cap by more than 166%, expanding the incentive for businesses to invest in on-site child care or partnerships, compared to the current lower threshold that limits larger-scale programs.
Potential Impacts
- On Citizens: Families, especially working parents with children under 13 or disabled dependents, could see reduced tax bills, potentially saving hundreds or thousands of dollars annually depending on income and expenses. This may ease financial burdens related to child care costs, which average $10,000+ per child in many areas.
- On Government Agencies: The Internal Revenue Service (IRS) would administer the expanded credits, likely increasing claim processing but also reducing federal tax revenue (estimated potential cost to the Treasury in billions over a decade, though not specified in the bill).
- On International Relations: No direct impact, as this is a domestic tax policy focused on U.S. taxpayers and businesses.
- Broader effects could include improved workforce participation for parents and reduced reliance on public assistance programs for child care.
Main Stakeholders Affected
- Families and Taxpayers: Primarily working parents or guardians claiming the dependent care credit, benefiting lower- and middle-income households most due to the credit's income-based percentage.
- Employers: Businesses, especially small to medium-sized ones offering child care facilities or services, who can now offset more costs through the enhanced credit.
- Child Care Providers: Indirectly supported through increased demand and employer investments.
- Government: The U.S. Treasury and IRS, facing revenue losses but potential long-term economic gains from a more stable workforce.
Notable Legal, Constitutional, or Political Implications
- Legal: As a straightforward tax code amendment, it aligns with Congress's authority under Article I, Section 8 of the U.S. Constitution to levy taxes. No challenges to enforceability are evident, though implementation would follow standard IRS rulemaking for guidance on claims.
- Constitutional: Neutral; it does not raise equal protection or due process concerns, as the credits are available based on objective criteria like income and expenses.
- Political: This could be seen as a bipartisan effort to address child care affordability amid rising costs and labor shortages, potentially influencing family policy debates. It may reduce the federal deficit less favorably due to revenue impacts, inviting scrutiny in budget reconciliation processes.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Recent Actions
- 2025-02-18: Referred to the House Committee on Ways and Means.
- 2025-02-18: Introduced in House
- 2025-02-18: Introduced in House
Bill Versions
- To amend the Internal Revenue Code of 1986 to increase the amount allowed as a credit under the expenses for household and dependent care services credit and the employer-provided child care credit. — issued 2025-02-18 — PDF (2 pages)