Bill > S1421

This bill enhances the Child and Dependent Care Tax Credit by making several significant changes to the existing tax code. It increases the tax credit percentage to 50% for taxpayers with adjusted gross incomes up to $125,000, with a gradual phaseout to 20% for those earning up to $400,000. The bill substantially raises the maximum creditable amount from $3,000 to $8,000 for one qualifying individual and from $6,000 to $16,000 for two or more qualifying individuals. For married couples filing separately, the bill creates a new rule that calculates the credit as if they had filed jointly, ensuring fairness and preventing couples from receiving more credit than they would on a joint return. Additionally, the bill introduces an annual inflation adjustment for the income thresholds and credit amounts, starting from 2025. Importantly, the bill makes the credit refundable for taxpayers who have a principal place of abode in the United States for more than half the taxable year, which means eligible individuals can receive the credit even if they owe no taxes. These changes aim to provide more substantial financial support to working families with child or dependent care expenses, with the amendments taking effect for taxable years beginning after December 31, 2024.

Budget and Finance

https://www.congress.gov/bill/119th-congress/senate-bill/1421/all-info