Tax Policy and Child Care
Overview
Strong funding is essential to strengthening child care in the United States, but updating provisions of the federal tax code is also an important part of the solution.
- The Child and Dependent Care Tax Credit (CDCTC) is the only tax credit designed specifically to help parents offset the cost of child care.
- The Dependent Care Assistance Program (DCAP) allows some working parents to set aside a small amount of their pre-tax paycheck to pay for child care expenses (including employer-sponsored child care contributions).
- The Employer-Provided Child Care Credit (known as 45F) supports businesses who want to locate or provide child care for their workforce, while also increasing the number of child care slots available in their community.
Unfortunately, these provisions are limited in their reach, which reduces their ability to help working parents access quality child care. Modernizing provisions like these would simultaneously help more parents afford child care while supporting employer efforts to connect employees to child care options.
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Understanding the Difference Between the Child Tax Credit and the Child and Dependent Care Tax Credit — and Why We Need Both
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FFYF Capsule Collection: Tax Policy and Child Care
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Letters of Support
- In September 2023, a group of 85 organizations, Chambers of Commerce and businesses sent a letter calling on members of Congress to make child care more affordable by updating the U.S. tax code.
- In January 2024, leaders of the Bipartisan Pre-K and Child Care Caucus — Reps. Suzanne Bonamici (D-OR), Joaquin Castro (D-TX), and Ashley Hinson (R-IA) — sent a letter to the Ways and Means Committee urging them to modernize four existing child care credits – the Child and Dependent Care Tax Credit, Child Tax Credit, Dependent Care Assistance Program, and Employer Provided Child Care Tax Credit – to “provide immediate relief for working families and small businesses nationally.”
- In January 2024, a group of 20+ national organizations signed a joint statement applauding the bipartisan Tax Relief for American Families and Workers Act of 2024 and calling on Congress to also modernize other existing child care credits – Child and Dependent Care Tax Credit, the Dependent Care Assistance Program, and the Employer-Provided Child Care Tax Credit – to help ease the tremendous burden of finding and affording child care for working families while supporting economic stability around the country.
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Federal Tax Provisions That Support Child Care
American families depend on affordable, reliable, quality child care to go to work – but this care is often hard to find and too costly. These challenges have a tremendous …
Bipartisan Bill Seeks to Leverage Existing Tax Credits to Support Working Parents and Employers in Accessing Child Care
Last week, Rep. Salud Carbajal (D-CA) and Rep. Lori Chavez-DeRemer (R-OR) introduced H.R. 4571, the Child Care Investment Act of 2023, which would enhance three existing tax credits to address …
