One Big Beautiful Bill—Three Child Care Tax Credit Wins

American families, policymakers, and business leaders agree that a strong, accessible, and affordable childcare system is essential to a competitive workforce and a growing economy. That is why the U.S. Chamber of Commerce applauds the inclusion of key child care tax enhancements in the One Big Beautiful Bill Act (O3B), which makes long-overdue improvements to three child care programs: the Employer-Provided Child Care Credit (45F), the Dependent Care Assistance Program (DCAP), and the Child and Dependent Care Tax Credit. 

Changes to Child Care Programs in O3B  

• 45F: The employer credit rate increased from 25 percent to 40 percent, and to 50 percent for eligible small businesses. The maximum credit rose from $150,000 to $500,000, or $600,000 for small businesses. Qualified expenditures now include costs associated with contracting with third-party intermediaries and jointly owned or operated childcare facilities. These changes make it easier for businesses to invest in childcare solutions for their workforce. 
• DCAP: The annual pre-tax contribution limit was permanently increased from $5,000 to $7,500 for individuals and joint filers, and from $2,500 to $3,750 for those married filing separately. This gives employees more flexibility to save for childcare expenses through employer-sponsored plans. 
• CDCTC: Beginning in 2026, the maximum reimbursement rate for the lowest-income earners will increase from 35 percent to 50 percent. The percentage of reimbursement for qualifying expenses will continue to decrease gradually as income rises. This means more working parents will receive a larger credit to help cover childcare costs. 

Why It Matters 

These enhancements are an important step toward addressing the childcare challenges that impact both families and employers. They provide businesses with more tools to support their teams and help parents stay in the workforce. 

The Chamber is pleased to see that Congress heard our message loud and clear during our Child Care Hill Day earlier this year, where representatives from state and local chambers shared first-hand accounts from small businesses in their communities, and made the case for strengthening childcare tax credits to support local economies. 

The Chamber will continue to advocate for policies that strengthen our workforce and bolster economic growth.

About the author

Stephanie Ferguson Melhorn

Stephanie Ferguson Melhorn is the Executive Director, Workforce and International Labor Policy. Her work on the labor shortage has been cited in the Wall Street Journal, Washington Post, and Associated Press.

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