Plain English
GovGreed Synthesis ·
Promoting Affordable Childcare for Everyone Act or the PACE Act This bill increases and makes refundable the tax credit for qualified child and dependent care expenses. The bill also increases the exclusion from gross income for employer-provided child and dependent care benefits. Under current law, a nonrefundable tax credit is allowed for up to 35% (maximum tax credit percentage) of qualified child and dependent care expenses incurred by an individual to work or look for work, up to a maximum amount. The percentage of such expenses allowed as a tax credit may be reduced, but not below 20% (minimum tax credit percentage), based on an individual’s adjusted gross income. The bill generally increases the tax credit for qualified child and dependent care expenses by increasing the maximum tax credit percentage to 50%, increasing the minimum tax credit percentage to 35%, and adjusting the maximum credit amounts annually for inflation. The bill also makes the tax credit for qualified child and dependent care expenses refundable. Finally, the bill increases and adjusts for inflation the amount that may be excluded from gross income for employer-sponsored child and dependent care benefits (e.g., dependent care flexible spending arrangements) to $7,500 (from $5,000).
Market Impact Map
Action Timeline
2025-04-10
Referred to the House Committee on Ways and Means.
2025-04-10
Introduced in House
2025-04-10
Introduced in House
Full Bill Text
119 HR 2900 IH: Promoting Affordable Childcare for Everyone Act U.S. House of Representatives 2025-04-10 text/xml EN Pursuant to Title 17 Section 105 of the United States Code, this file is not subject to copyright protection and is in the public domain. I 119th CONGRESS 1st Session H. R. 2900 IN THE HOUSE OF REPRESENTATIVES April 10, 2025 Ms. Tenney (for herself and Mr. Schneider ) 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 increase and make fully refundable the Child and Dependent Care Tax Credit, to increase the maximum amount excludable from gross income for employer-provided dependent care assistance, and for other purposes. 1. Short title This Act may be cited as the Promoting Affordable Childcare for Everyone Act or the PACE Act . 2. Refundability of Child and Dependent Care Tax Credit (a) In general The Internal Revenue Code of 1986 is amended— (1) by redesignating section 21 as section 36C; and (2) by moving section 36C, as so redesignated, from subpart A of part IV of subchapter A of chapter 1 to the location immediately before section 37 in subpart C of part IV of subchapter A of chapter 1. (b) Technical amendments (1) Paragraph (1) of section 23(f) of the Internal Revenue Code of 1986 is amended by striking 21(e) and inserting 36C(e) . (2) Paragraph (6) of section 35(g) of such Code is amended by striking 21(e) and inserting 36C(e) . (3) Paragraph (1) of section 36C(a) of such Code (as redesignated by subsection (a)) is amended by striking this chapter and inserting this subtitle . (4) Subparagraph (C) of section 129(a)(2) of such Code is amended by striking section 21(e) and inserting section 36C(e) . (5) Paragraph (2) of section 129(b) of such Code is amended by striking section 21(d)(2) and inserting section 36C(d)(2) . (6) Paragraph (1) of section 129(e) of such Code is amended by striking section 21(b)(2) and inserting section 36C(b)(2) . (7) Subsection (e) of section 213 of such Code is amended by striking section 21 and inserting section 36C . (8) Subparagraph (H) of section 6213(g)(2) of such Code is amended by striking section 21 and inserting section 36C . (9) Subparagraph (L) of section 6213(g)(2) of such Code is amended by inserting 36C, after 32, . (10) Paragraph (2) of section 1324(b) of title 31, United States Code, is amended by inserting 36C, after 36B, . (11) The table of sections for subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after the item relating to section 36B the following: Sec. 36C. Expenses for household and dependent care services necessary for gainful employment. . (12) The table of sections for subpart A of part IV of subchapter A of chapter 1 of such Code is amended by striking the item relating to section 21. (c) Effective date The amendments made by this section shall apply to taxable years beginning after December 31, 2025. 3. Enhancement of the Child and Dependent Care Tax Credit (a) In general Section 36C of the Internal Revenue Code of 1986, as redesignated by section 2 of this Act, is amended— (1) in paragraph (2) of subsection (a), by striking 35 percent reduced (but not below 20 percent) and inserting 50 percent reduced (but not below 35 percent) ; (2) by striking subsection (g) and redesignating subsection (f) as subsection (g); and (3) by inserting after subsection (e) the following new subsection: (f) Inflation adjustment (1) In general In the case of any taxable year beginning after 2025, each of the dollar amounts in subsections (a)(2) and (c) shall 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 increase determined under paragraph (1) is not a multiple of $50, such increase shall be rounded to the nearest multiple of $50. . (b) Effective date The amendments made by this section shall apply to taxable years beginning after December 31, 2025. 4. Increase in exclusion for employer-provided dependent care assistance (a) In general Subparagraph (A) of section 129(a)(2) of the Internal Revenue Code of 1986 (relating to dependent care assistance programs) is amended by striking $5,000 ($2,500 and inserting $7,500 (half such dollar amount . (b) Inflation adjustment Paragraph (2) of section 129(a) of such Code is amended by striking subparagraph (D) and inserting the following new subparagraph: (D) Inflation adjustment In the case of any taxable year beginning in a calendar year after 2026, the $7,500 amount in subparagraph (A) shall be increased by an amount equal to— (i) such dollar amount, multiplied by (ii) 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 2025 for calendar year 2016 in subparagraph (A)(ii) thereof. Any increase determined under the preceding sentence shall be rounded to the nearest multiple of $100. . (c) Effective date The amendments made by this section shall apply to taxable years beginning after December 31, 2025.
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