Tax Code Reform

Quality early childhood education supports better health, social, and economic outcomes in life—increasing productivity and reducing the need for expensive social spending in other areas later in life. Unfortunately, the cost of high-quality early learning and care programs are rapidly out-pacing other expenses faced by families, including the cost of higher education. While the tax code includes numerous provisions to help families offset higher education costs, very few incentives exist to offset early childhood education expenses.

Changing this dynamic is crucial, not just for the well-being of today’s children, but for the economic health of our country. Less than half of low-income children have access to high-quality early childhood programs that could dramatically improve their opportunities for a better future. This statistic is tragic when you consider that skills developed in the first five years greatly influence success later in life. Expanding availability and options for parents to access high-quality early childhood programs now, results in reduced costs to society later.

As Congress considers comprehensive tax reforms, FFYF believes that there is a significant opportunity to expand access to early childhood education by enhancing existing tax credits and deductions for families, and by adding new and innovative strategies to encourage investment in high-quality programs—such as by making the Child and Dependent Care Tax Credit (CDCTC) refundable for children under the age of five, enhancing the American Opportunity Tax Credit (AOTC) so it can be applied towards quality early childhood programs, expanding the definition of “qualified institutions” for tax-free scholarships, and increasing limits on the Dependent Care Assistance Program (DCAP) to incentive employers to contribute more to employee accounts.