The Early Care & Education Consortium Applauds Congress for Enhancing Critical Child Care Tax Incentives

WASHINGTON, July 3, 2025 /PRNewswire/ -- The Early Care and Education Consortium (ECEC) applauds Congress for including $16 billion in child care tax incentives in the One Big Beautiful Bill Act (OBBA) that passed out of both chambers on July 3, 2025. The inclusion of enhancements to the Child and Dependent Care Tax Credit (CDCTC), Employer-Provided Child Care Credit (Sec. 45F), and Dependent Care Assistance Program (DCAP) will help working families across the country access and afford child care that meets their unique needs.

ECEC is the leading non-profit alliance of multi-site, multi-state child care providers, key state child care associations, and premier educational service providers. ECEC members represent over 7,300 centers across 47 states, the District of Columbia, and Puerto Rico, serving over 1 million children and employing over 180,000 early educators and staff.

Child care is an economic necessity for many American families. Across the United States, working families struggle to afford child care, with parents often forced to miss work, cut back hours, or leave the workforce entirely to care for their children. Currently, 74% of mothers and 66% of fathers report that they have left work early, arrived late, or been absent due to a lack of child care.ⁱ The resulting work absences and loss of productivity cost the United States $122 billion a year.ⁱⁱ The OBBA enhancements to child tax incentives are a vital step in supporting America's families, children, and economy.

The OBBA increases the percentage of child care expenses parents can claim through the CDCTC, with the lowest-income families now being able to receive a maximum credit of 50% of their claimed child care expenses (up from the current 35%).ⁱⁱⁱ The income-based credit has a maximum credit value of $3,000 for a family with two children, which would cover over a month of center-based child care in most states.^iv Ultimately, the enhancements to the CDCTC will result in nearly 4 million families seeing an increase to the tax credit.^v In addition to the CDCTC, the OBBA enhances the DCAP by increasing the annual amount of pre-tax income families can set aside for child care expenses in an employer-offered flexible spending account from $5,000 to $7,500.^vi Together, the CDCTC and DCAP will directly support working families in helping cover the cost of child care.

For businesses wanting to provide child care benefits to their employees, the OBBA enhances Sec. 45F by increasing the percentage of qualified child care expenses businesses can receive a credit for from 25% to 40% for larger business (50% for smaller businesses), and expanding the maximum credit from $150,000 to $500,000 for larger businesses ($600,000 for smaller businesses).^vii These enhancements will allow more businesses to make investments in child care for their employees, thereby helping with recruitment and retention. Beyond these child care-specific provisions, ECEC also applauds the expansion the Child Tax Credit, which helps families pay for other child-related expenses.

While more remains to be done, collectively, the enhancements made to child care tax incentives in the OBBA are a historic milestone that will support millions of working families across the United States in accessing high quality child care.

ⁱ Care.com Editorial Staff. 2024. "This Is How Much Child Care Costs in 2024." Care.com Resources. January 17, 2024. https://www.care.com/c/how-much-does-child-care-cost/.
ⁱⁱ Ready Nation. 2023. "$122 Billion: The Growing, Annual Cost of the Infant-Toddler Child care Crisis." https://strongnation.s3.amazonaws.com/documents/1598/05d917e2-9618-4648-a0ee-1b35d17e2a4d.pdf?1674854626&inline;%20filename=%22$122%20Billion:%20The%20Growing,%20Annual%20Cost%20of%20the%20Infant-Toddler%20Child%20Care%20Crisis.pdf%22.
ⁱⁱⁱ First Five Years Fund. 2025. "What it Means: Child Care Tax Credits in the Senate Tax Package." https://www.ffyf.org/resources/2025/06/toplines-senate-tax-package.
^iv First Five Years Fund. 2025. "What it Means: Child Care Tax Credits in the Senate Tax Package." https://www.ffyf.org/resources/2025/06/toplines-senate-tax-package.
^v First Five Years Fund. 2025. "What it Means: Child Care Tax Credits in the Senate Tax Package." https://www.ffyf.org/resources/2025/06/toplines-senate-tax-package.
^vi First Five Years Fund. 2025. "What it Means: Child Care Tax Credits in the Senate Tax Package." https://www.ffyf.org/resources/2025/06/toplines-senate-tax-package.
^vii First Five Years Fund. 2025. "What it Means: Child Care Tax Credits in the Senate Tax Package." https://www.ffyf.org/resources/2025/06/toplines-senate-tax-package.

Media Contact
Sage Schaftel
Assistant Executive Director, Early Care & Education Consortium
[email protected]

SOURCE Early Care & Education Consortium