Affordable Child Care Act
- Sponsor
- Rep. Davids, Sharice [D-KS-3]
- Committees
- Ways and Means Committee (primary)
- Last action
- Feb 18, 2025
Bottom line
The bill aims to alleviate childcare costs for families and incentivize employer-provided childcare through substantial increases in existing federal tax benefits.
What it actually does
This bill proposes to significantly increase the financial relief available to families and employers for childcare and dependent care expenses by doubling the maximum amounts for the Child and Dependent Care Credit, the Dependent Care Assistance Program (DCAP) exclusion, and the Employer-Provided Childcare Credit. These changes would apply to taxable years beginning after December 31, 2024.
Proponents argue
Supporters argue that this legislation will provide crucial financial relief to working families grappling with the escalating costs of childcare, thereby enhancing their economic stability and encouraging greater workforce participation. They also contend that it will motivate businesses to offer more robust childcare support to their employees.
Opponents contend
Critics might argue that doubling these tax benefits could lead to a significant increase in the national debt due to reduced federal revenue, or that the benefits may disproportionately favor higher-income families who can afford more expensive care options, rather than effectively addressing the needs of all income brackets.
The bill is exceptionally concise and clearly written, making it very accessible for a quick and comprehensive understanding of its provisions.
Section 2(a)
Child and Dependent Care Credit Doubled
This provision amends Section 21(c) of the Internal Revenue Code of 1986 to double the maximum amount of expenses eligible for the Child and Dependent Care Credit. For one qualifying individual, the maximum expense is increased from $3,000 to $6,000. For two or more qualifying individuals, this limit is raised from $6,000 to $12,000, effectively doubling the potential tax credit for eligible taxpayers.
Supporters argue
Supporters argue this measure will directly ease the financial burden on working families by offsetting the high costs of childcare, thereby supporting parents' ability to remain in or re-enter the workforce and improving household financial stability.
Critics contend
Opponents might contend that this credit primarily benefits middle-to-higher income families who utilize formal childcare services and have sufficient tax liability to claim the credit, potentially offering less assistance to lower-income families or those using informal care arrangements.
Tradeoffs
This provision balances the goal of providing financial relief to working families with the potential impact on federal revenue and questions regarding the equitable distribution of benefits across various income levels.
Section 3(a)
Dependent Care Assistance Program (DCAP) Limit Doubled
This provision amends Section 129(a)(2) of the Internal Revenue Code of 1986 to double the maximum amount of dependent care assistance that an employee can exclude from their gross income. The limit for single filers or married couples filing jointly is increased from $5,000 to $10,000. For married individuals filing separately, the limit is increased from $2,500 to $5,000. It also removes a specific rule related to highly compensated employees.
Section 4(a)
Employer-Provided Childcare Credit Doubled
This provision amends Section 45F(b) of the Internal Revenue Code of 1986 to double the maximum tax credit available to employers for providing childcare facilities and services to their employees. The maximum credit amount is increased from $150,000 to $300,000, covering qualified childcare expenditures such as facility acquisition, construction, rehabilitation, expansion, and operating expenses.