RETAIN Act
The RETAIN Act would create a new refundable tax credit, labeled the Teacher and School Leader Retention Credit (Sec. 36C of the Internal Revenue Code), to encourage and reward retention of educators and related school staff in early childhood, elementary, and secondary education. The credit targets a broad set of positions—teachers, early childhood educators and program directors/providers, paraprofessionals, school-based mental health providers, and school leaders—and is designed to reward employees for each additional year they continuously work in qualifying roles at qualifying schools or early childhood programs. The credit grows with tenure, up to a 20-year limit, is indexed for inflation after 2026, and is intended to supplement but not replace state and local education funding. The bill also requires interagency data sharing and creates a federal data series on teacher and early childhood educator salaries to monitor pay trends. It would take effect for taxable years beginning after December 31, 2025.
Key Points
- 1New refundable credit (36C) for retention of eligible educators and school staff, including:
- 2- Early childhood educators, early childhood education program directors, early childhood education providers, teachers, paraprofessionals, school-based mental health providers, and school leaders.
- 3Credit amount schedule based on continuous years of employment in a qualifying position:
- 4- Year 1: $5,800
- 5- Year 2: $5,800
- 6- Years 3–4: $7,000
- 7- Years 5–9: $8,700
- 8- Year 10: $11,600
- 9- Years 11–15: $8,700
- 10- Year 16: $7,000
- 11- Years 17–20: $5,800
- 12- Cap: credit is reduced to zero after a total of 20 school years of continuous employment in qualifying positions
- 13- First-year eligibility requires at least 4 months of employment before the tax year
- 14- Amounts are adjusted for inflation after 2026
- 15Definitions and eligibility:
- 16- Eligible positions span teachers, paraprofessionals, school leaders, and specific roles in early childhood settings and school-based mental health services
- 17- Qualifying early childhood education program: programs serving children receiving federal assistance (e.g., CCDF, Head Start, child and adult care food program) and participating in a state quality measurement system; a temporary deeming rule allows certain programs to be eligible through Sept. 30, 2025 if they meet Head Start standards or are nationally accredited
- 18- Qualifying school: public elementary or secondary schools in districts eligible for Title I Part A or served by eligible educational service agencies, or Bureau of Indian Education funded schools in such districts
- 19Supplementing, not supplanting, state/local funds:
- 20- States/locals cannot reduce pay or loan-forgiveness compensation because an employee is eligible for the 36C credit
- 21- Methodology requirement to show that funding levels would be the same with or without the credit
- 22Information sharing and data:
- 23- U.S. Department of Education and HHS can share information to determine program eligibility
- 24- Interagency data series: Labor Department (with Treasury, Education, HHS) to publish on BLS website annual data on
- 25- average base salary of elementary/secondary teachers (disaggregated by Title I status and region)
- 26- average base salary of early childhood educators (by highest degree)
- 27Administrative and legal alignment:
- 28- Adds 36C to the tax code, with conforming amendments to W-2 reporting (reporting continuous years for employees in 36C positions)
- 29- Effective for taxable years beginning after December 31, 2025