Reps. Davis, DelBene, and Sánchez Champion Bill to Reduce the Cost of Child Care for Working Families through Tax Credits

Representatives Danny K. Davis (D-IL), Suzan DelBene (D-WA), and Linda Sánchez introduced the Child and Dependent Care Tax Credit Enhancement Act to permanently expand child care tax credits to help working families receive up to $4,000 for one child or $8,000 for two or more children to cover child care costs. In 2021, Reps. Davis, DelBene, and Sánchez secured the temporary expansion of the Child and Dependent Care Tax Credit that almost quadrupled the average tax credit from more than $550 among households that claimed the credit in 2020 to more than $2,100 in 2021. 

The Child Care and Dependent Credit Enhancement Act will increase the maximum credit amount to $4,000 per child up to $8,000 for two or more children, expand eligibility to low-income families, make the credit available to married couples who file separately due to high student loan debt, and retain the credit’s value over time by indexing it to inflation. This bill is led by Senators Bob Casey (D-PA), Ron Wyden (D-OR), and Patty Murray (D-WA) in the Senate.

High-quality, affordable child care is essential to the economic well-being of families, businesses, and our country. Yet, child care places a major financial burden on American families. The price of child care can range from $5,357 to $17,171 per year depending on location and type of care.  Astoundingly, the cost of center-based care for two children is more than the average mortgage in 41 states and more than the average annual rent in all 50 states plus DC.  Households under the poverty line spend nearly one third of their income on child care, and increases in median child care prices are connected to lower maternal employment rates. Further, the child care crisis hits families of color disproportionately hard.  For a single parent who has never been married who is Black, Hawaiian/Pacific Islander, or American Indian/Alaska Native, child care can cost 36%, 41%, or 49% of the median income, respectively, compared to only 31% for single White parents.  Further, Latino and American Indian and Alaska Native parents disproportionately live in child care deserts.

Unfortunately, as currently structured, the Child and Dependent Care Tax Credit fails to meet the needs of tens of millions of working families. Very few families receive meaningful benefit from the credit due to the extremely low phase-out level of $15,000, the low expense limits, the non-refundable nature, and the loss of benefit due to inflation.  For example, in 2020, there was a 13-percentage-point disparity between working parents who qualified for the Earned Income Tax Credit and those who benefited from the current child care credit. This disparity reflects the critical need to modernize this credit to help low– and moderate-income working parents. 

“High-quality, affordable child care is essential to the economic well-being of families, businesses, and our country,” said Rep. Davis.  “I am proud to lead the Child and Dependent Care Tax Credit Enhancement Act that would restore the 2021 credit so that families could receive up to $4,000 for child care for one child (or up to $8,000 for two or more children), much better than the almost $600 that the typical family receives currently.  This bill would strengthen the financial well-being of families and grow our economy.  It is critical that Congress acts now to help working families.”

“Accessible, high-quality child care is critical for the well-being of families, workers, and our economy. But rising care costs are straining families’ budgets, making it difficult to meet their children's most essential needs,” said Congresswoman Suzan DelBene (WA-01). “The Child and Dependent Care Tax Credit has been extremely successful in providing relief to parents who rely on child care so they can work. This legislation would further expand this program so more kids can receive quality care, enabling their parents to better contribute to our economy.”

“High childcare expenses should never be a barrier to a parent’s ability to work and provide for their family,” said Rep. Sánchez. “That’s why I’m proud to help lead the Child and Dependent Care Tax Credit Enhancement Act so that no parent has to decide between the two. This important bill will provide much needed tax relief to our hard-working families while allowing them to continue providing for their loved ones.”

“The Child and Dependent Care Tax Credit Enhancement Act would make a meaningful difference for families who are currently struggling to pay for child care and still afford the necessities. This bill would help millions of women and families -- especially those living paycheck to paycheck, who currently receive little or no benefit from the tax credit. It’s vital that Congress improve this tax credit to support families with low and moderate incomes, and at the same time, they must work to pass emergency child care funding to address the ongoing child care crisis.” -- Amy Matsui, Senior Counsel and Director of Income Security at the National Women’s Law Center  

“Often conflated with the child tax credit, the Child and Dependent Care Tax Credit is one of the only tax incentives that helps working families with their child care expenses.  As the cost of care increases, many families must contend with whether their current job pays enough to justify their child care expenses,” said Radha Mohan, Executive Director, Early Care & Education Consortium.  “For families where one parent must leave the workforce because they cannot afford the cost of care, this often hurts the family from an economic standpoint in the long run.  The CDCTC Enhancement Act helps ensure that families do not have to make this choice by providing a credit to offset the cost of care.  When paired with programs such as the Child Care and Development Block Grant, this bill will ensure that many families will have reduced their child care costs by over 50%.”

“Child care is one the greatest expenses parents face, and often comes with a higher cost than what families spend on housing or in-state college tuition. The Child Care and Dependent Tax Credit helps offset the high cost of child care, but is in real need of modernization,” said First Five Years Fund Executive Director Sarah Rittling. “Reps. Danny Davis, Suzan DelBene, and Linda Sánchez’s Child and Dependent Care Tax Credit Enhancement Act of 2024 is a key part of the solution. The bill makes essential updates to the CDCTC to ensure more parents are able to keep more of what they make and helps make the child care they rely on more affordable. We are grateful for their leadership in supporting families with young children.”

“The Child and Dependent Care Tax Credit Enhancement Act is a step in the right direction towards improving the affordability of high-quality child care for working families.  By increasing the maximum value of the credit, families that struggle to meet monthly payments or qualify for public child care subsidy programs will now be able to offset up to $8,000 off their child care expenses,” said Patrick Murray, Vice President of Government Affairs, KinderCare Learning Companies.  “KinderCare Learning Companies is proud to support this legislation and appreciative to Representatives Davis, DelBene, and Sánchez for their leadership on this issue.” 

The bill is endorsed by state and national child and worker advocates, including:  Center for Law and Social Policy; Child Care Aware of America; Early Care and Education Consortium; First Five Years Fund; First Focus Campaign for Children; KinderCare; MomsRising; National Association for the Education of Young Children; National Women’s Law Center; Pennsylvania Partnerships for Children; Restaurant Opportunities Center (ROC) United; Save the Children; Start Early; Society for Human Resource Management (SHRM); and Zero to Three.

For a summary of the Child and Dependent Care Tax Credit Enhancement Act, please click here.