Weekly OBBBA Spotlight, Week 6: Expanded Child and Dependent Care Credit (CDCC)
- Feb 10
- 2 min read
OBBBA’s Enhanced Child and Dependent Care Credit: Bigger Benefits for Working Families
The One Big, Beautiful Bill Act (OBBBA) significantly expands the federal Child and Dependent Care Credit, providing greater relief to working families and caregivers for tax year 2025 and beyond.
Key Enhancements Effective for 2025
Feature | Pre-OBBBA Law (2024) | OBBBA (2025 and Beyond) |
Max Credit Rate | 35% of qualified expenses | 50% of qualified expenses |
Max Qualified Expenses | $3,000 (1 child), $6,000 (2+) | $10,000 (1 child), $20,000 (2+) |
Max Credit | $1,050 (1 child), $2,100 (2+) | $5,000 (1 child), $10,000 (2+) |
Refundable? | No | Partially refundable (up to $4,000) |
Income Phaseout | Starts at $15,000 AGI, ends at $43,000 | Starts at $150,000 AGI, ends at $500,000 |
Eligibility & Qualified Expenses
Eligible taxpayers: Must have earned income and pay for care of a qualifying child under 13, or a spouse/dependent incapable of self-care.
Qualified expenses: Include daycare, preschool, summer day camps, before/after school care, and certain in-home care (must be work-related).
Employer-provided benefits: The exclusion for employer-provided dependent care assistance remains at $5,000 and is coordinate with the credit.
Refundability & Phaseouts
Refundable portion: Up to $4,000 of the credit is refundable for AGI below $150,000 (joint) or $75,000 (single/HOH); the refundable amount is reduced as AGI rises.
Phaseout: The credit percentage and refundability are phased out for AGI above $150,000, fully phased out by $500,000 AGI.
Planning Opportunities
Maximize documentation: Ensure all care providers supply their taxpayer identification numbers (TINs) and receipts.
Coordinate with employer benefits: Careful coordination is needed if receiving employer-provided dependent care assistance.
Consider timing: Bunching expenses or prepaying for care in 2025 may maximize the available credit under the higher limits.
What’s Next?
Next week, we’ll cover OBBBA’s new partially refundable adoption credit and expanded school choice credit.
For personalized projections or to discuss eligibility, contact us.
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