FFYF’s Sarah Rittling on Child Care Tax Enhancements in the Final Reconciliation Package 

Final passage of the 2025 reconciliation bill contains updates to tax credits which will help make child care more affordable for more working families with young children including:

• Enhancements to the Child and Dependent Care Tax Credit, the only tax credit that specifically helps working parents offset the cost of child care;
• Improvement of the Employer-Provided Child Care Credit (45F), which supports businesses who want to help locate or provide child care for their workforce; 
• Expansion of the Dependent Care Assistance Plan (DCAP), flexible spending accounts that allow working parents to set aside pre-tax dollars to pay for child care expenses. 

The following is a statement from Sarah Rittling, Executive Director of First Five Years Fund:

“With nearly two-thirds of children under age five living in households where all available parents are in the workforce, child care is a necessity for most working families. Efforts to improve and expand child care-related tax credits are a vital step forward for families and children.

“The updated tax credits, including the Child and Dependent Care Tax Credit (CDCTC), are aimed at relieving some of the financial pressure child care costs put on families. Under current law, a family with two young children making less than $150,000 typically receives around  $1,200 through the CDCTC. With today’s enhancements, that benefit would see a $900 boost that can make a meaningful difference for parents managing tight budgets.Together, CDCTC, with the enhanced Employer-Provided Child Care Credit (45F), and Dependent Care Assistance Plan (DCAP) will help to address the affordability and accessibility of child care  while ensuring that employers can be part of the solution.

“We commend lawmakers in both the House and Senate who championed this issue and helped to ensure it was part of the final passage. As the need for affordable child care continues to impact families and the economy alike, these tax enhancements represent a practical approach that supports parents, strengthens the workforce, and sets children up for success.”

For toplines on the expansion of all three child care tax credits, click here.