As the US government continues to focus on affordability, lawmakers are exploring ways to expand tax credits for families. The Republican Study Committee has released a framework for a second budget bill, known as “Reconciliation 2.0,” which outlines priorities like homeownership, health care, energy prices, and financial support for families. This proposal comes during a mid-term election year, with both parties pushing messaging about affordability as many Americans struggle with the cost of housing, food, electricity, and health care.
The framework includes a proposal to expand access to the child and dependent care tax credit (CDCTC), which partially offsets up to $6,000 of care expenses for two or more “qualifying individuals” — typically children under age 13 — when parents who file taxes jointly both work. It’s essential to note that the CDCTC is often confused with the child tax credit (CTC), which provides up to $2,200 per child under age 17 for the 2025 tax year and doesn’t require both parents to earn income.
Understanding the Child and Dependent Care Tax Credit
Only a small percentage of families claim the CDCTC each year. According to the latest IRS estimates, roughly 6.5 million returns filed the form to claim the CDCTC for tax year 2022, compared to nearly 37 million returns that claimed the child tax credit or credit for other dependents. Currently, about 13% of families with children receive the CDCTC, whereas almost 90% of families with children receive the CTC.
Garrett Watson, director of policy analysis at the Tax Foundation, a nonprofit think tank, notes that while Trump’s “big beautiful bill” expanded both tax credits, “there’s still a lot of interest in further reforms.” The Republican framework aims to expand CDCTC eligibility by removing the work requirement for both parents who file taxes jointly, which would end the “marriage penalty” and support stay-at-home parents and young families.
Proposed Changes to the CDCTC
The proposed change would allow more families to claim the CDCTC, but it’s unclear whether Reconciliation 2.0 will happen in 2026 amid competing legislative priorities, experts say. Margot Crandall-Hollick, a principal research associate at the Urban-Brookings Tax Policy Center, clarifies that this isn’t a traditional marriage penalty, but rather an elimination of a work requirement for moderate and higher-income married couples.
Currently, the CDCTC is non-refundable, meaning the benefit is limited by a return’s total taxes owed. Non-refundable credits are generally less beneficial to lower-income families because they typically owe little to no income taxes. While there’s been bipartisan interest to make the credit refundable, that change wasn’t included in the final version of Trump’s “big beautiful bill.”
For more information on the child and dependent care tax credit and the proposed changes, visit here.
Smart Tip for Readers
To maximize your potential tax benefits, it’s essential to understand the differences between the child and dependent care tax credit and the child tax credit, and to review your eligibility for these credits as tax laws and regulations evolve.
