Tax credits for child care expanded; refundable credit phases out at $150K income

What it does

This bill expands tax credits and deductions for child care and dependent care expenses. It increases the employer child care credit from 25% to 50% of qualified expenses (60% for small businesses), raises the maximum credit from $150,000 to $500,000 ($600,000 for small businesses), allows jointly owned child care facilities to qualify, increases the dependent care assistance program exclusion from $5,000 to $7,500 annually, and creates a new refundable household and dependent care credit for individuals earning up to $150,000, with the credit percentage declining as income rises. The net effect is that working parents and employers investing in child care receive larger tax benefits.

Why we flagged it

The bill's core mechanism is straightforward: it increases existing tax credits and deductions for child care and dependent care expenses, making them more generous across multiple provisions. This is a direct tax-benefit expansion, not a regulatory change or appropriation.

What the text implies

• The refundable credit (Section 36C) phases out at $150,000 AGI, meaning higher-income families receive smaller credits; this creates a regressive structure where middle-income families benefit most, while wealthy families and low-income families (who may not owe tax) benefit less or not at all.
• Expansion of employer credits may incentivize large employers to offer on-site or subsidized child care, potentially creating a two-tier system where workers at large firms with child care benefits gain advantage over workers at small firms without such programs.
• The dependent care center definition (more than 6 individuals) may exclude smaller, home-based family child care providers, limiting the scope of eligible care arrangements despite stated affordability goals.
• Repeal of Section 21 (the old dependent care credit) and replacement with Section 36C consolidates child care tax benefits into a single refundable credit, which simplifies the code but may create transition complexity for taxpayers and preparers in the first year of implementation.

Section numbers refer to the bill text the analysis read — linked under Primary records below.

Who it affects

Working parents and families with dependent care costs receive expanded tax relief, reducing out-of-pocket child care expenses and making care more affordable. Employers gain incentives to invest in child care infrastructure, which can increase availability and reduce costs for workers.

Who stands to gain

• working parents and families with child care expenses
• employers offering or subsidizing child care
• small businesses (enhanced credit rates)
• dependent care centers and child care providers (indirectly, via increased demand)

Named in the bill

Internal Revenue Code Section 45F (employer child care credit), Internal Revenue Code Section 129 (dependent care assistance programs), Internal Revenue Code Section 21 (repealed dependent care credit), Internal Revenue Code Section 36C (new refundable household and dependent care credit), Small businesses (defined by gross receipts test under Section 448(c)), Dependent care centers

Where it stands

27 cosponsors: 19 Democrats, 8 Republicans.

• Mar 4, 2025 — Introduced · Congress.gov: “Introduced in House”
• Mar 4, 2025 — Referred to House Committee on Ways and Means · Congress.gov: “Referred to the House Committee on Ways and Means”

Dates and quoted wording are Congress.gov's action record; the timeline shows status changes, not every procedural step.

Money around this bill

3 lobbying clients named this bill on 5 disclosure filings across 2 quarters, Dec 2025 to Jun 2026. Those filings disclosed $19,740,000 in lobbying spend. A filing names 30 bills on average, so that figure is what each filing reported, not a share belonging to this bill.

More lobbying clients named this bill than 61% of bills with at least one filing.

Salud Carbajal, the sponsor, reported $631,982 in PAC receipts in the 2026 cycle.

• Chamber of Commerce of the U.S.A. — $17,960,000 on 1 filing
• American Hotel & Lodging Association — $1,680,000 on 2 filings
• Learning Care Group — $100,000 on 2 filings

Lobbying Disclosure Act filings through Jul 20, 2026. A filing shows who paid to lobby on a bill it names, not what changed.