Small Business Dependent Care FSA Opportunity Act

The Small Business Dependent Care FSA Opportunity Act proposes to create a new tax credit for small businesses that establish and maintain dependent care flexible spending accounts (DCFSAs) for their employees. These accounts allow workers to set aside pre-tax income to pay for eligible expenses like childcare, preschool, and after-school programs. Currently, many small businesses do not offer these benefits due to the administrative and startup costs involved.

Under the proposal, businesses with 100 or fewer employees would be eligible for a tax credit to offset the costs of setting up the plan and educating employees about the benefit. The bill aims to provide a credit of up to $250 per participating employee who is not a high-earner, with a minimum annual credit of $500 and a maximum of $5,000. Employers would be able to claim this credit for the first three years they offer the plan.

If enacted, the bill would likely increase the number of small business employees who have access to tax-advantaged childcare savings. By reducing the financial barrier for employers, the legislation seeks to help small businesses remain competitive in the hiring market while easing the childcare cost burden for working families.