FFYF Capsule Collection: Tax Policy and Child Care

In A Nutshell

With two-thirds of children ages five and under living in homes where all available parents are working, child care is not optional for most families – it’s essential. 

In July 2025, Congress expanded the reach of child care-related tax provisions as part of H.R.1, the tax reconciliation bill. This included improvements to:

• The Child and Dependent Care Tax Credit (CDCTC), the only tax credit designed specifically to help parents offset the cost of child care. 
• The Dependent Care Assistance Program (DCAP), which allows working parents to set aside a small amount of their pre-tax paycheck to pay for child care expenses. 
• The Employer-Provided Child Care Credit (known as 45F), which supports businesses who want to locate or provide child care for their workforce.  

Together, these make up a $16 billion federal investment in child care through tax provisions. 

Overview

• This topline page contains an overview of each of the provisions and how the new law compares to previous law.
• In an official statement from FFYF, Executive Director Sarah Rittling said: “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.”
• The press covered the inclusion of the tax credits in the overall bill, including Vox, USA Today, and Forbes.

Example

Here’s what the change means for families receiving the CDCTC. The size of a family’s credit depends on four factors: Their income, how many children they have, whether they’re filing a single or joint return, and how much of their child care expenses they are claiming (up to $3,000 for one child and $6,000 for two or more children). 

Overall, under the new law:

• An estimated 4 million families¹ could receive an increased tax credit.
• For a majority of filers², this increase could be as much as $900 (2+ children)/ $450 (one child).
• The total tax credit families could see ranges from $1,500-$3,000 for lowest-income families (with 1 or 2+ children) or $600-$1,200 for highest income families (with 1 or 2+ children).

An estimated 5.7 million families claim the CDCTC to help offset their child care expenses. 

¹Based on FFYF calculation from 2022 Internal Revenue Service filer data.

²Single parents making less than $75,000 or married couples filing jointly who make less than $150,000.

Support – Polling

• Support for expanded CDCTC in a national 2025 poll – 86% overall, with 83% of Republicans, 83% of Independents, and 91% of Democrats.
• Support for expanded 45F and DCAP in a national 2024 poll – 84% overall, with 76% of Republicans, 82% of Independents, and 93% of Democrats.

SUPPORT – LETTERS

• In May 2025, 64 local Chambers of Commerce, national organizations, and employers joined First Five Years Fund and the U.S. Chamber of Commerce in a letter calling on the Senate Finance Committee to expand child care tax credits — specifically the Child and Dependent Care Tax Credit (CDCTC) and the Employer-Provided Child Care Credit (45F) — as part of the tax reconciliation bill.
• In December 2024, 127 national, state, and local organizations sent a letter calling on the incoming Trump administration to support working families access to affordable child care by expanding the Child and Dependent Care Tax Credit (CDCTC).
• In August 2024, over 150 national, state, and local organizations, Chambers of Commerce and businesses sent a letter calling on members of Congress to make child care more affordable for working families by updating provisions in the U.S. tax code. 
• 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.
• 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 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.

Tools You Can Use

• For a basic overview, this topline explainer shows how the expanded credits in the Senate tax package would help families. 
• These one-pagers provide a deep dive into three primary provisions, including: CDCTC, 45F, and DCAP.
• This side-by-side explainer compares the tax provisions and shows how they work together.
• And this document examines the differences between the Child Tax Credit (CTC) and the Child and Dependent Care Tax Credit (CDCTC) and why both are valuable for families with children.

Media