CHILD Act of 2025 (H.R. 413) would expand and index the tax-advantaged Dependent Care Assistance Program (DCAP) benefits. The bill raises the maximum amount that can be excluded from gross income for DCAP contributions from $5,000 (or $2,500 if married filing separately) to $10,000 (or $5,000 if married filing separately). It also adds an automatic inflation adjustment to all dollar amounts in Section 129 (the DCAP rules) using the standard cost-of-living adjustment (COLA) framework, with rounding to the nearest $50. Additionally, it removes a deadwood provision in the same section and specifies the new rules apply to calendar years beginning after December 31, 2024 (i.e., starting in 2025). In short, the bill would give families a larger, inflation-adjusted tax break for dependent-care costs and simplify/modernize the DCAP provisions.
Key Points
- 1Increased maximum DCAP exclusion: The cap goes from $5,000 to $10,000 for individuals (and $2,500 to $5,000 for those married filing separately). This is the amount you can exclude from gross income for dependent-care expenses when using a DCAP.
- 2Inflation indexing: All dollar amounts in Section 129 would be adjusted annually by the cost-of-living adjustment (COLA) described in the bill, using a base year tied to 2023 (by substituting 2023 for 2016 in the relevant provision) and rounded to the nearest $50.
- 3Rounding rule: If an inflation increase isn’t a multiple of $50, it would be rounded to the nearest $50.
- 4Deadwood removal: The bill removes subparagraph (D) in Section 129(a)(2), which is intended to streamline or remove outdated/unused language.
- 5Effective date: These changes would apply to calendar years beginning after December 31, 2024 (so starting in 2025).