H.R.1426 - To amend the Internal Revenue Code of 1986 to increase the amount allowed as a credit under the expenses for household and dependent care services credit and the employer-provided child care credit. (119th Congress)
Summary
H.R.1426 proposes amendments to the Internal Revenue Code of 1986, specifically targeting the expenses for household and dependent care services credit and the employer-provided child care credit. The bill aims to increase the amount allowed as a credit for both of these categories. It was introduced in the House of Representatives on February 18, 2025, by Mr. Mackenzie and referred to the Committee on Ways and Means.
The proposed changes include increasing the household and dependent care services credit from $3,000 to $6,000 in paragraph (1) and from $6,000 to $12,000 in paragraph (2) of Section 21(c). Additionally, the employer-provided child care credit in Section 45F(b) would be increased from $150,000 to $400,000.
The effective date for both amendments is for taxable years beginning after the date of enactment of the Act.
Expected Effects
If enacted, H.R.1426 would provide increased tax credits for families incurring expenses for household and dependent care, as well as for employers providing child care benefits. This could reduce the tax burden on eligible families and incentivize employers to offer more child care support.
The increased credits could lead to greater affordability of child care services for working families. It may also encourage more workforce participation, especially among parents who might otherwise stay home due to child care costs.
The changes would primarily affect individual taxpayers and businesses that provide child care benefits, with the potential for broader economic impacts related to workforce participation and consumer spending.
Potential Benefits
- Reduced Tax Burden: Eligible families and employers would experience a lower tax burden due to the increased credits.
- Increased Affordability of Child Care: Higher credits make child care services more accessible to working families.
- Workforce Participation: The bill could encourage greater workforce participation, especially among parents.
- Employer Incentives: Businesses may be more inclined to offer child care benefits to employees.
- Economic Stimulus: Increased disposable income for families could lead to greater consumer spending.
Potential Disadvantages
- Potential for Increased Deficit: Increased tax credits could lead to a decrease in government revenue, potentially increasing the budget deficit.
- Complexity: The changes could add complexity to the tax code, requiring additional guidance and compliance efforts.
- Limited Reach: The benefits may primarily accrue to families and businesses already utilizing these credits, potentially excluding lower-income families who may not be able to afford child care even with the credit.
- Inflationary Pressure: Increased demand for child care services, driven by the credit, could lead to higher prices.
- Administrative Burden: The IRS may face increased administrative burden in processing the increased number of claims.
Most Disadvantaged Areas:
Constitutional Alignment
H.R.1426 aligns with the general welfare clause of the Constitution, as it aims to support families and encourage workforce participation. Specifically, the preamble of the Constitution states the goal to "promote the general Welfare".
Congress's power to tax and spend for the general welfare is established in Article I, Section 8, Clause 1. This bill falls under that purview as it modifies the tax code to provide credits for specific expenses.
There are no apparent conflicts with individual liberties or other constitutional rights. The bill does not infringe upon any protected freedoms and appears to be within the scope of Congress's legislative authority.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).