Trump's sweeping law increases child care tax credits. Here's how much and who benefits.
Sarah Foster, 35, quit her job in the summer of 2024 after the stress of parenting and working full time led to anxiety, depression, vascular disease and chronic pain in her neck and shoulders. She said she was constantly cobbling together child care plans when her nanny fell through, to "not be the person who kept calling out" at work.
Foster's husband is a physician, and she describes her family as middle to upper class. Still, she worried about their ability to cover child care for her two kids − which totals about $34,000 per year − without dual income. She knew she needed to focus on getting healthy during her short time away from her career. She is working part time now.
Her husband's employer provides a dependent care flexible spending account for working parents. So the Fosters can put away up to $5,000 pretax to go toward child care costs. President Donald Trump's recently passed reconciliation law bumps that flexible spending account cap to $7,500, the first time that child care tax benefit has seen a permanent increase since 1986.
When Foster, who lives in San Antonio, first heard about the change, she chuckled and said, "That's great."
She told Paste BN: “But also ... the full cost of my child care is, like, more than three times that, you know?”
Several changes in the new law target parents. Some changes, like $1,000 savings accounts for newborns, are meant to incentivize having more children. But further down in the legislation are the biggest increases to child care tax programs in a generation – even if many parents and child care advocates say they don't scratch the surface of fixing the child care crisis in America. Those programs are:
- The Child and Dependent Care Tax Credit, which reimburses parents for child care costs and is separate from the better-known Child Tax Credit.
- The Dependent Care Assistance Program, which allows parents to set aside tax-free money to pay for child care similarly to how many pay for health care expenses.
- The Employer-Provided Child Care Credit, which reimburses businesses for providing employees with child care.
Full-time child care for one infant is the highest monthly expense for some families in the United States. The cost of child care for two children is more expensive than rent in all 50 states, and a 2024 study from SmartAsset found it costs $25,000 per year, on average, in Washington, DC, where child care costs are highest.
"I think the reconciliation bill did almost nothing for child care. And for sure almost nothing related to the scale of the need," said Andrea Paluso, co-director of Child Care for Every Family Network, a national care policy advocacy group.
Rewarding employers who provide or subsidize child care "does not work," Paluso said. And it's likely only families in the middle and upper classes will benefit from the flexible spending account cap increase.
Sen. Katie Britt, R-Alabama, worked on the child care provisions as part of an earlier bill with Sen. Tim Kaine, D-Virginia, and is credited with helping to get those provisions into the spending and tax law, previously dubbed the "Big Beautiful Bill," after they did not appear in the House's version. She told Paste BN she made the case for child care benefits to her party and then met with colleagues in the House and Senate individually.
"I felt like the time is now," Britt told Paste BN. "If you think about the Republican Party and what we ran on and won on, on Nov. 5, we said, 'We are the party of parents, and we are the party of hardworking Americans.' And I stood up in conference, and I said, 'There is no better way to address and help both those groups in one than actually tackling the affordability and accessibility of child care."
What child care program changes are in Trump's tax and spending law?
Sarah Rittling, the executive director of the First Five Years Fund, said Republicans and Democrats have long supported expanding the tax benefit programs, even if their expansion ended up on legislation that was passed along party lines.
Kaine, a Democrat who was unavailable for an interview, said in a March 5 statement about a similar bill: "The child care crisis is holding our families and economy back. I hear from Virginia parents all the time about how hard it is to find affordable child care, from child care providers who are forced to leave their jobs because of low wages, and from businesses who are having trouble finding the employees they need."
The First Five Years Fund estimates that a family with two young children that makes less than $150,000 will see another $900 in their tax refund due to the expanded child and dependent care tax credit. The tax credit was last updated in 2001, Britt said.
Working parents such as Foster who use a flexible spending account through their employers to pay for child care can avoid paying taxes on another $2,500 of those expenses. Since 1986, working parents have been able to put $5,000 in pretax money into those accounts to pay for child care. The new law increased that to $7,500. This could be a tax decrease of $600, depending on their income.
"I tell people, 'Reagan was president the last time we expanded it,'" Britt told Paste BN.
Another tax credit, known as 45F, reimburses businesses for a portion of what they spend providing child care for their employees. But Rittling said it was “antiquated, and businesses really weren’t able to take advantage of it.” Britt said this program, too, was last updated in 2001.
The program was previously designed for large businesses, and they were allowed to get one-quarter of their expenses reimbursed, up to $125,000. The law increases the tax credit to 40% of expenses, up to $500,000. The law also makes the program permanent, something Britt said will make larger businesses more likely to create on-site child care facilities.
Additionally, the law expands the program so that small businesses can get up to $600,000 through the same tax credit, and can pool their money together to provide child care benefits across their businesses. Britt said they needed to be included because "people forget that the small businesses are the backbone of our communities."
"I am not setting down the mantle," Britt said. "I’m going to continue to carry it, but I think the fact that we’ve been able to effect change in this area – where it has not been done and nobody has knocked that wall down yet – I think that this is monumental."
A 'disaster' or 'long-overdue progress'? Mixed reactions to Trump's new tax bill
The child care changes in the new law might help some families, but they “do almost nothing to improve affordability and access for those who need it most,” said Katherine Gallagher Robbins, senior research fellow for the National Partnership for Women & Families. Low income families are less likely to see the support outlined in the law, she said, and the law doesn't address child care staffing issues or low pay for child care workers.
“On the whole, the bill is a disaster for caregivers and care recipients," Robbins said. She pointed to food assistance being stripped from millions of people through reduced SNAP benefits and Medicaid cuts that will deeply impact disabled people of all ages and their caregivers. “Any benefits from these changes pale in comparison to the overall harmful impacts of the bill on children and families.”
Reshma Saujani, CEO and founder of Moms First, is more hopeful about the changes. Moms First lobbied at Capitol Hill and garnered 25,000 signatures from mothers urging Trump and Congress to make child care a priority. The law is proof, Saujani said, that a bipartisan, business-backed movement "can deliver real results for families."
"While this tax bill includes painful cuts for many families, it also makes long-overdue progress on child care," Saujani said. "For the first time in decades, we’re seeing new federal investments that help working parents afford care and encourage employers to provide it."
It's a step in the right direction, Foster said, but there's still a long way to go in supporting American parents. The individualized culture in this country leaves each family on their own to find child care solutions, she said, making it "way more expensive and way more complicated and way more cognitively burdensome.”
“Our system is not set up to support people having kids," she said.
(This story was updated to correct a typo)
Madeline Mitchell's role covering women and the caregiving economy at Paste BN is supported by a partnership with Pivotal Ventures and Journalism Funding Partners. Funders do not provide editorial input. Reach Madeline at memitchell@usatoday.com and @maddiemitch_ on X.