Child and Dependent Care Tax Credit Enhancement Act of 2025

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2994 Introduced in House (IH)]

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119th CONGRESS
  1st Session
                                H. R. 2994

  To amend the Internal Revenue Code of 1986 to enhance the Child and 
  Dependent Care Tax Credit and make the credit fully refundable for 
                           certain taxpayers.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             April 24, 2025

   Mr. Davis of Illinois (for himself, Ms. DelBene, Ms. Sanchez, Mr. 
   Beyer, Ms. Moore of Wisconsin, Ms. Chu, Ms. Sewell, Mr. Boyle of 
 Pennsylvania, Ms. McCollum, Ms. Brownley, Mr. Larson of Connecticut, 
Ms. Wilson of Florida, Ms. Norton, Mr. Cleaver, Mr. Carson, Mr. Khanna, 
Mr. Connolly, and Mr. Panetta) introduced the following bill; which was 
              referred to the Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
  To amend the Internal Revenue Code of 1986 to enhance the Child and 
  Dependent Care Tax Credit and make the credit fully refundable for 
                           certain taxpayers.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Child and Dependent Care Tax Credit 
Enhancement Act of 2025''.

SEC. 2. ENHANCEMENT OF CHILD AND DEPENDENT CARE TAX CREDIT.

    (a) In General.--Paragraph (2) of section 21(a) of the Internal 
Revenue Code of 1986 is amended to read as follows:
            ``(2) Applicable percentage.--
                    ``(A) In general.--For purposes of paragraph (1), 
                the term `applicable percentage' means 50 percent 
                reduced (but not below the phaseout percentage) by 1 
                percentage point for each $2,000 (or fraction thereof) 
                by which the taxpayer's adjusted gross income for the 
                taxable year exceeds $125,000.
                    ``(B) Phaseout percentage.--For purposes of 
                subparagraph (A), the term `phaseout percentage' means 
                20 percent reduced (but not below zero) by 1 percentage 
                point for each $2,000 (or fraction thereof) by which 
                the taxpayer's adjusted gross income for the taxable 
                year exceeds $400,000.''.
    (b) Increase in Dollar Limit on Amount Creditable.--Subsection (c) 
of section 21 of the Internal Revenue Code of 1986 is amended--
            (1) in paragraph (1), by striking ``$3,000'' and inserting 
        ``$8,000''; and
            (2) in paragraph (2), by striking ``$6,000'' and inserting 
        ``$16,000''.
    (c) Special Rule for Married Couples Filing Separate Returns.--
Paragraph (2) of section 21(e) of the Internal Revenue Code of 1986 is 
amended to read as follows:
            ``(2) Married couples filing separate returns.--
                    ``(A) In general.--In the case of married 
                individuals who do not file a joint return for the 
                taxable year--
                            ``(i) the applicable percentage under 
                        subsection (a)(2) and the number of qualifying 
                        individuals and aggregate amount excludable 
                        under section 129 for purposes of subsection 
                        (c) shall be determined with respect to each 
                        such individual as if the individual had filed 
                        a joint return with the individual's spouse, 
                        and
                            ``(ii) the aggregate amount of the credits 
                        allowed under this section for such taxable 
                        year with respect to both spouses shall not 
                        exceed the amount which would have been allowed 
                        under this section if the individuals had filed 
                        a joint return.
                    ``(B) Regulations.--The Secretary shall prescribe 
                such regulations or other guidance as is necessary to 
                carry out the purposes of this subsection.''.
    (d) Adjustment for Inflation.--Section 21 of the Internal Revenue 
Code of 1986 is amended by adding at the end the following new 
subsection:
    ``(i) Inflation Adjustment.--
            ``(1) In general.--In the case of a calendar year beginning 
        after 2025, the $125,000 amount in paragraph (2) of subsection 
        (a) and the dollar amounts in subsection (c) shall each be 
        increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                the taxable year begins, determined by substituting 
                `calendar year 2024' for `calendar year 2016' in 
                subparagraph (A)(ii) thereof.
            ``(2) Rounding.--If any dollar amount, after being 
        increased under paragraph (1), is not a multiple of $100, such 
        dollar amount shall be rounded to the next lowest multiple of 
        $100.''.
    (e) Credit Made Refundable.--Section 21(g) of the Internal Revenue 
Code of 1986 is amended to read as follows:
    ``(g) Credit Made Refundable for Certain Individuals.--If the 
taxpayer (in the case of a joint return, either spouse) has a principal 
place of abode in the United States (determined as provided in section 
32) for more than one-half of the taxable year, the credit allowed 
under subsection (a) shall be treated as a credit allowed under subpart 
C (and not allowed under this subpart).''.
    (f) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2024.
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