HR-1426-119
Referred to the House Committee on Ways and Means.
Sponsored by Ryan Mackenzie (R-PA)
What it does
This bill would double the maximum federal tax credit individuals can claim for child and dependent care expenses — from $3,000 to $6,000 for one qualifying child or dependent, and from $6,000 to $12,000 for two or more. It would also increase the maximum annual tax credit employers can claim for providing child care services to employees from $150,000 to $400,000. Both credits remain nonrefundable under the bill, meaning they can reduce a taxpayer's liability to zero but would not generate a refund.
Who benefits
Working parents and guardians who pay for child or dependent care — particularly those with higher care costs who currently hit the existing credit ceiling. Families with two or more children or dependents would see the largest potential increase. Employers who operate or subsidize child care facilities for employees, particularly mid-size and larger businesses whose costs exceed the current $150,000 cap. Child care providers and facilities may benefit indirectly from increased demand if the credit makes care more affordable. Employees at companies that expand child care benefits in response to the higher employer credit.
Who is hurt
Lower-income working families who owe little or no federal income tax would receive limited or no benefit, since both credits remain nonrefundable. The federal government would collect less tax revenue, which could indirectly affect funding for other programs. Taxpayers broadly may bear the cost of the revenue reduction if it contributes to deficit spending. Child care providers not affiliated with employer-sponsored programs may see no direct benefit from the employer-side credit increase.
Supporters argue
Supporters argue that child and dependent care costs have risen sharply — the average annual cost of center-based child care now exceeds $10,000 in most states, far outpacing the current $3,000 credit ceiling, which has not been substantially updated in decades. They contend that doubling the credit better aligns federal support with actual market costs, reduces a significant financial barrier to workforce participation (particularly for women), and that the employer-side increase incentivizes businesses to invest in child care infrastructure that benefits both employees and local economies.
Opponents argue
Opponents argue that because both credits remain nonrefundable, the bill's benefits flow primarily to middle- and upper-income families who have sufficient tax liability to use the full credit, while the lowest-income working families — who face the greatest affordability challenges — receive little or nothing. They contend that expanding a nonrefundable credit is a poorly targeted mechanism for addressing child care access, and that the revenue cost would be better directed toward refundable credits or direct subsidies that reach families regardless of tax liability.
Constitutional context
This bill falls squarely within Congress's taxing and spending authority under Article I, Section 8, Clause 1 of the Constitution. It modifies existing provisions of the Internal Revenue Code and raises no novel constitutional questions. The Origination Clause (Art. I, §7, cl. 1) is satisfied as the bill originates in the House.
Checks and balances
Congress sets the credit amounts through statute; the IRS administers and enforces the credits through the tax filing system; the President must sign or veto the bill in its entirety per Clinton v. City of New York (1998).
Historical precedent
The Child and Dependent Care Tax Credit was established by the Economic Recovery Tax Act of 1981 and has been modified several times, including a temporary expansion under the American Rescue Plan Act of 2021, which increased credit amounts and made the credit partially refundable for one year before reverting to prior law.