The First Five Things to Know About: The PACE Act

Child care is one of the largest expenses most families with young children face, with an average annual price tag of $11,582 or $965 per month. It can easily cost more than the average rent, leaving millions of working families struggling to afford the quality care they need. And without it, many parents are forced to miss work or exit the workforce entirely, leaving families financially unstable, employers scrambling to fill jobs, and young children missing opportunities to learn and grow. As 65% of children in the U.S. under 5 have all available parents in the workforce, access to affordable child care that meets each family’s individual needs remains essential for a robust economy.

The Promoting Affordable Childcare for Everyone (PACE) Act would help provide some needed relief. Introduced by Reps. Claudia Tenney (R-NY) and Brad Schneider (D-IL), this bipartisan bill would update existing provisions in the U.S. tax code to help more families afford child care by: 

• Enhancing the Child and Dependent Care Tax Credit (CDCTC) by making the credit fully refundable so that it reaches more low- and middle-income working families; indexing the credit to inflation to ensure it matches rising costs of child care into the future, and raising the credit rate so that families will see more money back in their pockets. 
• Expanding the Dependent Care Assistance Plan (DCAP) by increasing the amount of pre-tax dollars families can put into a child care assistance plan (similar to a Flexible Spending Account) from $5,000 to $7,500.

The PACE Act puts parents in the driver’s seat by ensuring that parents can choose the type of care that works best for their family.

• The CDCTC fosters parental choice by allowing parents to offset the cost of child care at the provider of their choice, whether it be center-based care, faith-based care, or an in-home child care provider.
• DCAP allows parents to save pre-tax dollars in a dependent care FSA for their child care costs, which parents can then use to cover child care costs at a provider of their choice.

Voters strongly support the provisions in the PACE Act.

• A 2024 poll from First Five Years Fund found that 76% of voters (including 62% of Republicans, 74% of Independents, and 92% of Democrats) support increasing the CDCTC to help ease the burden of child care costs for working families.
• And 84% of voters (including 84% of swing state voters in AZ, MD, MT, OH, PA, and NV)) support providing tax incentives to businesses which provide or help their employees find and afford quality early childhood education programs.

And the PACE Act has had strong, bipartisan support. In past Congresses, the bill was  previously led by Ways & Means Chairman Jason Smith (R-MO) and former Rep. Stephanie Murphy (D-FL) in the House and Sens. Angus King (I-ME),  Susan Collins (R-ME), Jacky Rosen (D-NV),  Kyrsten Sinema (D-AZ), and former Sen. Richard Burr (R-NC), in the Senate. More recently, leaders of the Bipartisan Pre-K and Child Care Caucus sent a letter to the Ways and Means Committee, urging their colleagues to update the tax code to help make child care more affordable.