Child Care Availability and Affordability Act

Summary#

The bill amends the Internal Revenue Code to expand tax benefits for child care and dependent care. It increases the employer-provided child care credit rate and maximum credit, raises the amount employees may exclude for dependent care assistance, and creates a new refundable credit for household and dependent care expenses needed for work. The bill also includes special higher credit rules for small businesses and makes a number of technical changes to the tax code.

What it means for you#

• Employers that provide or operate child care facilities may be able to claim a larger tax credit for qualifying child care expenditures.
• Small businesses that meet the bill's gross receipts rules may get a higher credit rate and larger maximum credit.
• Employees who receive dependent care assistance through their employer may exclude a larger amount from taxable income.
• Individual taxpayers with qualifying dependents (children under 13, dependents who cannot care for themselves, or an incapacitated spouse) may be eligible for a new refundable household and dependent care credit to help pay for household services and care needed for employment. Married taxpayers must file jointly to claim that credit.

Expenses#

• Employer child care credit: the bill raises the percentage of qualified expenditures accounted for from 25% to 50% and raises the maximum credit per taxpayer from $150,000 to $500,000. Small businesses may use 60% and a $600,000 maximum under a special rule.
• Dependent care exclusion: the bill raises the maximum excludable amount from $5,000 to $7,500 (and from $2,500 to $3,750 in the alternative single limit language shown).
• New refundable credit (section 36C): starts at an "applicable percentage" of 50% of eligible employment-related expenses, phased down by income (not below 35%) for taxpayers with adjusted gross income above $15,000 and further phased down above $150,000; dollar limits are $5,000 for one qualifying individual and $8,000 for two or more qualifying individuals.
• Effective dates: employer credit changes apply to amounts paid or incurred after enactment; dependent care exclusion changes apply to amounts paid or incurred after enactment; the new refundable credit applies to taxable years beginning after enactment.
• No publicly available information on estimated federal budgetary costs or savings is included in the bill text provided.

Proponents' View#

No publicly available information in the bill text about proponents' arguments or statements.

Opponents' View#

No publicly available information in the bill text about opponents' arguments or statements.