Child Care and the Federal Tax Code

Millions of families across the United States need child care. Yet for too many, child care is hard to find and even harder to afford.

Congress can lead the way. The U.S. tax code contains several provisions designed to help working families with child care expenses, but most haven’t been updated in decades and, as a result, have not kept pace with the cost of care. 

First Five Years Fund has made it easy to get up to speed on what these tax provisions are, how they work, and how they could be improved with our new CHILD CARE & THE FEDERAL TAX CODE KIT. In it you’ll find a curated set of tools and information, including:

• One-page explainers on tax provisions including: 
  • The Child and Dependent Care Tax Credit, the only tax credit that specifically helps working families pay for child care;
  • Dependent Care Assistance Plans, or DCAP, flexible spending accounts (like a health savings account) that allow working parents to set aside pre-tax dollars for child care expenses;
  • And the Employer-Provided Child Care Credit (known as 45F), which incentivizes businesses to locate or provide child care for their employees;
• A timeline of child care tax provision milestones through the years;
• A comparison chart of the various federal tax provisions and how they work;
• Links to Congressional Research Service reports on the tax provisions;  
• Polling showing voter support for the various tax provisions;
• Letters of support signed by organizations, business leaders, and advocates;
• And more!

This year, Congress has a prime opportunity to protect and expand these provisions, helping families today while continuing to advocate for the policies that will improve and strengthen federal programs in the longer term.

It’s a win-win. Modernizing the tax code is a step forward in helping more hard-working families pay for the child care they need. And making child care more affordable and accessible for families with little ones not only provides young children with vital opportunities to learn and grow, it also strengthens family finances, supports a thriving workforce, and boosts the economy.

Download2025 FFYF TAX RESOURCE (5.11 MB)