Bipartisan efforts are being revived in Washington every time tax season rolls around to ensure that child care is made less expensive for working families. The Child Care Availability and Affordability Act (CCAA) has been reintroduced to target certain provisions within the tax code in order to increase the financial assistance available for families with children under the age of 13. Senators Katie Britt (R-AL) and Tim Kaine (D-VA), along with Representatives Mike Lawler (R-NY) and Salud Carbajal (D-CA), have spearheaded legislation that offers tax benefits for expenses in three ways: employer credits, dependent care exclusions, and child and dependent care tax credits.
Increased employer tax benefits
Presently, firms can receive a tax credit for 25% of the expenditures incurred in providing either child care services or referral programs, up to a maximum of $150,000 in any given year. In the case of the present legislation, the intention is to raise the tax credit to 50% and double the cap to $500,000. Small businesses would also benefit further, with a 60% credit and $600,000 cap. This modification caters to the very objective of encouraging businesses to look into such child care avenues for their employees.
Larger dependent care assistance programs
Actually, families can exclude child care expenses of as much as $5,000 per year from their taxable income through the Dependent Care Assistance Programs. Under the suggestion, that limit would be increased to $7,500, which would help families with costs associated with care during after-school activities and summer camp.
Making tax credits accessible
The Child and Dependent Care Tax Credit permits families, depending on their income, to claim a certain percentage of their childcare expenses incurred. The temporary expansion during the COVID era made this credit payable to low-income families but that has lapsed. Refundability would therefore restore such provision under the CCAA, allowing poor households with little or no income tax liability to benefit fully from the credit. It would not only increase the value of the tax credit, offering up to $2,500 for one child and $4,000 for more than two children, but also enlist other benefits.
Another alternative house proposal promotes another approach
Besides that, another similar bill, the Affordable Child Care Act, is now up for discussion in the House in which Representatives Sharice Davids (D-KS) and Brian Fitzpatrick (R-PA) are taking the lead. It continues the employer credit at 25% but raises capping to $300,000. In addition, this doubles the DCAP exclusion limit to $10,000 while raising the highest qualified expenses under the Child and Dependent Care Tax Credit but refrains from making the credit refundable.
Beyond credit: Addressing supply breakdown
Tax relief is, however, just one piece in a massive puzzle. It is in the midst of several bills to provide bipartisan solutions to further increase and improve child care supply. The Small Business Child Care Investment Act would expand the loan options available to nonprofit child care providers. The Child Care Workforce and Facilities Act provides states with grants for adding capacity in child care deserts. Another bill, the Child Care Workforce Act, would initiate a demonstration program to increase wages and retention of staff.
Building an enduring child care infrastructure
Experts have stressed that any tax reform is, in fact, fashioned by continuous investment in programs such as the Child Care and Development Block Grant (CCDBG) and the 21st Century Community Learning Centers. These federal programs not only widen access but also strengthen infrastructure that can support long-term improvements in the quality of child care.
The course ahead
These bipartisan efforts signal growing momentum toward alleviation in the lives of American families, long-lasting relief. Earlier, advocates are expecting that such already gaining support with additional endorsement in Congress will translate into actual policy changes reflective of the needs of families across the nation.
