If this bill becomes law, there will be higher dollar limits for eligible services for which employees can claim the dependent care tax credit. Rep. Steve Israel, D-N.Y., introduced the Middle Class Dependent Care Fairness Act of 2012 (H.R. 5886) on June 1.
Israel’s bill calls for:
- increasing the credit to $35,000 per year;
- increasing the dollar limits for eligible services that the Economic Growth and Tax Relief Reconciliation Act of 2001 put in place;
- making the dollar limits permanent so they do not expire if EGTRRA does.
EGTRRA increased the annual limit for services rendered one qualifying individual under Code Section 21 from $2,400 to $3,000, and the threshold for eligible services for two or more qualifying individuals.
The bill says it would make these changes because Congress found that:
- During the past few decades, the need for child care has increased, which has spelled greater expenses for middle-class families, which Congress finds can be a major burden for modern families.
- In 2011, 44 percent of all American families included children under the age of 18. Fifty-eight and one-half percent of married couples with children both worked in 2011. The labor force participation rate of mothers with children under the age of 6 was 63.9 percent in 2011, compared with 39 percent in 1975.
- Nationwide, on any given day, 4.6 million children under the age of 5 are in child care outside the home.
- On average, families with children under the age of 5 spent $171 a week on child care in 2010; that amounts to $8,892 a year.
H.R. 5886 is now before the House Ways and Means Committee.
Finding out More
The text of H.R. 5886 is available online.