Major Tax Relief for Child Care Costs and Increased Employer Incentives.
This law significantly increases financial support for families covering child care expenses by making the dependent care tax credit refundable and raising deduction limits. It also boosts tax incentives for businesses that invest in or support child care facilities for their employees, aiming to improve the availability and affordability of care options. These changes directly benefit household budgets and access to care.
Key points
The Dependent Care Tax Credit becomes refundable, meaning families can receive the credit even if it exceeds their tax liability (especially beneficial for lower-income families).
The maximum amount of expenses eligible for the family tax credit increases to $5,000 (one child) or $8,000 (two or more children).
The limit on pre-tax money employees can set aside for dependent care (FSA/DCAP) increases from $5,000 to $7,500.
Employers receive much larger tax credits (up to $500,000, or $600,000 for small businesses) for establishing or supporting workplace child care facilities.
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