Recent bills in Congress attempt to use the tax code to provide more support to low-income families. In this explainer, we cover efforts to change the Child and Dependent Care Tax credit, which families can use to offset their expenses for child care. (See our separate explainer on the Child Tax Credit, which targets other costs associated with raising children.) 

How would these bills help families, and how do they compare? We offer this summary to help spark dialogue on the Child and Dependent Care Tax Credit and other areas of tax reform designed to help families.

The Child and Dependent Care Tax Credit (CDCTC) is the only provision of tax code explicitly dedicated to defraying the cost of child and dependent care. The CDCTC allows parents to pay less federal income tax by claiming a percentage of qualifying child care expenses they incurred while they worked or sought employment. The credit is calculated by multiplying the amount of qualified expenses ($3,000 maximum for parents with one child and $6,000 maximum for parents with two or more children) by a designated credit rate. This rate is determined by parents’ adjusted gross income (AGI) and decreases incrementally as income rises.

The CDCTC has not been permanently adjusted in over two decades and is not indexed for inflation, meaning the credit has not kept pace with the rising cost of care. At most income levels, the average credit amount is $600, covering only a fraction of the cost of annual child care. The CDCTC is also nonrefundable, which means that if the credit is bigger than the amount of tax families owe, families do not receive the full amount of the credit as a refund. Instead, they receive only the difference between the two figures. As a result, low-income families and those who do not owe a significant amount in taxes receive little to no credit. Currently, nearly 44% of tax returns that claim the CDCTC come from families with an AGI over $100,000; only 6% of returns from households making under $25,000 a year claim the credit, despite those households accounting for 33% of all returns. 

In 2021, the American Rescue Plan Act (ARPA) temporarily expanded the CDCTC. ARPA made the credit fully refundable, increased the credit rate to extend the benefit to more income brackets, and increased the maximum expenses that parents may claim. While the expansion helped more families offset the cost of care and reduced child poverty, it expired the following year, and the CDCTC has returned to its original levels. 

But today there is a new opportunity to improve and expand the CDCTC. Significant provisions of the Tax Cuts and Jobs Act—the overhaul of the U.S. tax code under the first Trump administration—are set to expire at the end of 2025. As Congress considers tax policy reform, there is growing bipartisan support for reforming the CDCTC, including the proposals outlined below: 

Child Care Availability and Affordability Act (2025)

Introduced by Sens. Tim Kaine (D-VA) and Katie Britt (R-AL) as well as Reps. Mike Lawler (R-NY) and Salud Carbajal (D-CA), this bill 

• Makes the credit available to families who owe few or no taxes: Under current law, the credit is not refundable. This means that when the credit is bigger than the amount of tax a family owes, the family doesn’t get all of it. (They receive the difference between the two amounts). If a family owes no tax, it does not get any credit. The bill makes the credit partially refundable, allowing more low-income families to benefit, even if they don’t have a tax liability. 
• Increases the amount of care expenses a family can claim and raises the maximum credit size: The credit is calculated as a percentage of allowable deductible expenses. The new maximum allowable amounts are $5,000 for families with one child and $8,000 for families with two or more children. The new maximum claimable percentages would rise from 35% to 50%. This means that a family whose income makes them eligible for the maximum credit would now be able to get a credit of $2,500 for one child (50% of $5,000) or $4,000 for two or more children (50% of $8,000).  

Affordable Child Care Act (2025)

Introduced in February by Reps. Brian Fitzpatrick (R-PA), Sharice Davids (D-KS), Ryan Mackenzie (R-PA), and Suzanne Bonamici (D-OR), the legislation

Doubles the maximum amount of allowable care expenses a family can claim: The new amount is $6,000 for families with one child and $12,000 for families with two or more children. The maximum claimable percentage remains 35%, meaning the maximum credit would now be $2,100 for families with one child and $4,200 for families with two or more children.

A comparative look at recent Child and Dependent Care Tax Credit proposals

A reform that’s still needed: including stay-at-home parents in the CDCTC

Another opportunity to reform the CDCTC is to include stay-at-home parents in the credit. Despite playing a significant role in the fabric of our nation, stay-at-home parents are largely excluded from the tax code. While it is certainly not a new concept, lawmakers should consider making stay-at-home parents eligible for the CDCTC. 

There have been previous efforts to incorporate them, including: 

• A provision was added to a vetoed tax bill in 1999 that would have made stay-at-home parents eligible for the CDCTC during the first year of their child’s life and assigned a minimum claim of $200 per month. Integrating stay-at-home parents into the CDCTC was also elevated in President Clinton’s 1999 State of the Union address. 
• Former Sen. John H. Chafee (R-RI) introduced a bill in 1999 that included a maximum CDCTC benefit of $900 for parents who stay home for one year to care for children aged 3 or younger.
• A provision was included in the Democratic-led Right Start Act of 2001 to assign a minimum claimable CDCTC amount of $90 per month for stay-at-home parents with children under 1. 
• Sen. Lisa Murkowski (R-AK) introduced the Stay At Home Parents Tax Credit Act in 2003. This stand-alone bill assigned a minimum CDCTC claimable amount of $200 per month for stay-at-home parents with children under age 6. Former Sen. Samuel Brownback (R-KS) later added this provision to versions of the Parents’ Tax Relief Act until 2007. 

Despite momentum in the late 1990s and early 2000s, efforts to integrate stay-at-home parents into the tax code tapered off before the 2010s. Findings from a recent Capita report confirm that parents are interested in financial support from the government in the form of tax credits or rebates. 

Lawmakers should reconsider including stay-at-home parents in their efforts to reform the CDCTC.