Lowering the cost of raising a family

How does this legislation strengthen the Child Tax Credit? 

The Child Tax Credit was boosted to $2,200 per child and indexed for inflation. Click here to learn more. 

How does the bill help families who want to adopt? 

For the first time, up to $5,000 of the Adoption Tax Credit is refundable. Previously, families could only claim the credit up to the amount they owed in taxes. Now, families can receive direct financial support to help welcome a child home. 

How does it expand paid family leave opportunities? 

The Paid Family and Medical Leave Tax Credit for employers has been made permanent and expanded nationwide. By reducing the required employee tenure from one year to six months, more workers will be eligible when major life events occur. Click here to learn more about if your business/employer qualifies. 

How does it reduce the cost of childcare? 

The Child and Dependent Care Tax Credit was strengthened. This tax credit is available when you pay someone to care for your child or another qualifying person so you (and your spouse, if filing jointly) can work or look for work. The credit rate increased from 35% to 50%, allowing families to claim up to $3,000 in expenses for one child or $6,000 for two or more children. This targeted relief helps families offset childcare expenses by an average of nearly $1,000. Click here to learn more. 

What changes were made to dependent care flexible spending accounts? 

A Dependent Care Assistance Flexible Spending Account (FSA) is an employer-offered benefit that allows working parents to set aside part of their paycheck before taxes to pay for childcare or dependent care expenses such as daycare, preschool, summer day camps, or care for an elderly dependent, so they can work. Through the Working Families Tax Cuts Act, the maximum amount families can set aside tax-free increased to $7,500 per year (up from $5,000). This allows families to use more pre-tax income to cover childcare costs, helping reduce their overall tax bill while paying for care. 

How does this help small businesses support working parents? 

The legislation increases the employer childcare credit, allowing businesses to claim a credit for a larger share of the costs associated with helping employees access childcare. Employers can receive a credit of up to $500,000 annually (or $600,000 for small businesses) for qualified childcare expenses. It also allows multiple small businesses to pool resources and partner with a childcare provider together, making it easier for smaller employers that cannot afford to run a childcare center on their own to offer childcare options to employees.