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.

Learn more

Resource

The First Five Things To Know About: The Federal Tax Code and Child Care

October 29, 2024

Child care is not a luxury for American families – it’s a necessity. Yet the high costs associated with quality child care are rapidly outpacing most other expenses, including the …

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FFYF Capsule Collection: Tax Policy and Child Care

October 29, 2024

Millions of American families today are struggling to find the affordable, reliable, quality child care they depend on to go to work. This has a devastating impact on our youngest …

Resource

The Child Tax Credit and the Child and Dependent Care Tax Credit ⁠— Understanding the Difference

September 27, 2024

The Child and Dependent Care Tax Credit and the Child Tax Credit support families in very different ways. Families need both. Child care is not a luxury for American families …

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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.
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 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).