H.R.2994 - Child and Dependent Care Tax Credit Enhancement Act of 2025 (119th Congress)
Summary
H.R.2994, the Child and Dependent Care Tax Credit Enhancement Act of 2025, proposes amendments to the Internal Revenue Code of 1986, specifically targeting the Child and Dependent Care Tax Credit. The bill aims to enhance the credit by increasing the applicable percentage, raising the dollar limit on creditable amounts, and adjusting the rules for married couples filing separately. It also includes provisions for inflation adjustments and makes the credit fully refundable for certain taxpayers.
Expected Effects
If enacted, this bill would increase the financial assistance available to families for child and dependent care expenses. This would be achieved through a more generous tax credit. The changes would apply to taxable years beginning after December 31, 2024.
Potential Benefits
- Increased tax credits for eligible families, reducing their financial burden related to child and dependent care.
- The refundable nature of the credit for certain individuals would provide direct financial assistance, even if they have little or no tax liability.
- Inflation adjustments would help maintain the real value of the credit over time.
- The changes to the rules for married couples filing separately could provide more equitable treatment.
- The increase in the dollar limit on the amount creditable would allow families to claim a larger portion of their expenses.
Potential Disadvantages
- The increased credit and refundability could increase government spending and potentially contribute to budget deficits.
- The phaseout provisions based on adjusted gross income could create complexity in calculating the credit.
- The bill's impact on workforce participation is uncertain; while it could enable more parents to work, it could also disincentivize work for some.
- Potential for increased tax fraud due to the refundable nature of the credit.
- The benefits may disproportionately favor certain income groups, depending on the specific design of the phaseout and credit amounts.
Most Disadvantaged Areas:
Constitutional Alignment
The bill aligns with the Constitution's broad mandate to "promote the general Welfare" (Preamble). Congress has the power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States (Article I, Section 8, Clause 1). The specific provisions of the bill, such as the income thresholds and credit amounts, are policy choices within the purview 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).