Child and Dependent Care Tax Credit Enhancement Act of 2025

S. 1421 would enhance the Child and Dependent Care Tax Credit (CDCTC), a tax benefit that helps working parents pay for child care expenses. The bill would increase the maximum credit from $1,050 to $4,000 for one child and from $2,100 to $8,000 for two or more children. It would also make the credit refundable for low-income families, meaning they could receive the full benefit even if they owe little or no income tax, and would automatically adjust the credit amounts each year to account for inflation.

Currently, the CDCTC has limited reach—only about 13% of families with children claimed it in 2022. The bill would expand eligibility to more low-income working families and make the credit available to married couples filing separately. The credit would phase out for higher-income families earning more than $400,000. If enacted, the bill would provide more substantial tax relief to working parents struggling with child care costs, though the bill is currently in committee and has not yet been voted on by the full Senate.