RETAIN Act
The RETAIN Act would create a new refundable tax credit, called the Teacher and School Leader Retention Credit (section 36C), designed to improve retention of educators and related staff in high-need early childhood, elementary, and secondary education settings. The credit is available to a broad group of positions—ranging from teachers and principals to early childhood educators, program directors, paraprofessionals, school-based mental health providers, and other leaders—so long as they work in qualifying schools or qualifying early childhood education programs. The amount depends on the length of continuous service in eligible positions, with annual adjustments and a cap effectively limiting the credit to a 20-year career span. The bill also imposes reporting requirements (W-2 information) on employers and calls for interagency data collection to track salaries, program quality, and related indicators, with special rules to ensure funds are supplemental and do not reduce existing state or local funding. The program would take effect starting in tax years beginning after December 31, 2025. In short, the bill uses a rising, time-based tax credit to reward educators and school leaders for staying in high-need schools and early childhood programs, in hopes of reducing turnover and strengthening educational outcomes.
Key Points
- 1Establishes a refundable Teacher and School Leader Retention Credit (section 36C) for a wide set of roles, including:
- 2- Eligible early childhood educators, program directors, and providers
- 3- Eligible teachers and paraprofessionals
- 4- Eligible school-based mental health services providers
- 5- Eligible school leaders (e.g., principals and assistant principals)
- 6Credit amount depends on continuous years of employment in any eligible position, with amounts as follows:
- 7- Year 1: $5,800; Year 2: $5,800
- 8- Years 3–4: $7,000
- 9- Years 5–9: $8,700
- 10- Year 10: $11,600
- 11- Years 11–15: $8,700
- 12- Year 16: $7,000
- 13- Years 17–20: $5,800
- 14- An individual may receive the credit for up to 20 total school years; beyond 20 years, the credit amount is zero
- 15First-year eligibility requires at least 4 months of employment before the start of the taxable year
- 16Programs and schools must be “qualifying” to receive the credit, defined as:
- 17- Qualifying early childhood education programs: programs serving children funded by federal or state support (e.g., Head Start, CCDF, child and adult care food programs) and participating in a state quality system; with a transitional rule through Sept 30, 2025 for certain programs not meeting all criteria but meeting Head Start standards or national accreditation
- 18- Qualifying schools: public elementary or secondary schools in Title I-eligible districts (or served by educational service agencies eligible for Title I) or Bureau of Indian Education-funded schools in such districts
- 19Inflation adjustments and rounding: starting after 2026, credit amounts are adjusted for inflation and rounded to the nearest $100
- 20Support to ensure funds are supplementary: states and districts cannot reduce compensation or loan forgiveness for employees eligible for the credit, and they must demonstrate that funding remains the same as it would have been without the credit
- 21Information sharing and definitions: federal education and health agencies coordinate to verify qualifying status; definitions cover a range of roles and specify criteria (e.g., teacher of record, licensure requirements, paraprofessional standards)
- 22Data and transparency: creates interagency data efforts with the Bureau of Labor Statistics to publish annual salary data for teachers and early childhood educators, including distinctions by Title I status and geographic region
- 23Effective date: applies to taxable years beginning after December 31, 2025