Here’s what HIVE AI had to say about “Are there new deductions for childcare expenses?”:
Childcare tax breaks: what’s new and what still applies
Child and Dependent Care Tax Credit (CDCTC) — current rules
- For 2024–2025, you can generally claim 20%–35% of up to $3,000 of qualifying expenses for one qualifying person, or up to $6,000 for two or more, depending on your AGI. Day camp counts; overnight camp does not. You must have earned income and the care must enable you to work, look for work, or attend school. Report provider details on your return. Use Form 2441. 1
- Nursery school/preschool before kindergarten is considered “care” (includes incidental lunch/activities). Kindergarten and higher-grade tuition is not “care,” but before/after-school care may qualify. 2
- The custodial parent can claim the CDCTC even if they allow the noncustodial parent to claim the dependency exemption/child as a dependent. File Form 2441 and Schedule 3. 3
What changes for 2026 under the new law
- The One Big Beautiful Bill Act increases the CDCTC percentage starting in 2026: the maximum rate becomes 50% of qualifying expenses and then phases down in steps by AGI. Statute text sets the new two‑tier phase‑down (not below 35% until $75,000 AGI, then phasing toward 20% with a higher joint threshold). Effective for tax years beginning after 12/31/2025. 4
- Policy summaries reflect that, beginning in 2026, the credit rate phases from 50% down to 35% between $15,000–$43,000 AGI, then from 35% to 20% between $43,000–$75,000 AGI (joint thresholds higher per statute). The $3,000/$6,000 expense caps remain part of the structure. 5
Are there “new deductions” for childcare?
- For individuals, childcare relief is provided as a credit (the CDCTC), not an itemized or above‑the‑line deduction. There is no new personal deduction for childcare expenses in 2024–2025. Publication 529 continues to confirm the general suspension of miscellaneous itemized deductions; OBBBA later makes that suspension permanent for most categories beginning in 2026 and does not create a personal childcare deduction. 6
- For employers, the employer‑provided childcare credit (IRC §45F) is enhanced beginning in 2026. The OBBBA increases the maximum annual credit cap to $500,000 ($600,000 for eligible small businesses) and provides inflation adjustments. That is a business credit, not a deduction, but it substantially increases employer incentives to offer or subsidize childcare. 7
- The IRS’s employer childcare credit page outlines qualifying expenditures for facilities and resource/referral services; this is a credit computed on those qualified expenditures and is separate from deductions. 8
Practical takeaways
- If you’re an individual parent, plan on the CDCTC rather than a deduction. Keep records of qualifying expenses and provider information, and use Form 2441. Day camp can count; overnight camp cannot. 1
- Expect a larger CDCTC percentage beginning with your 2026 return if you’re within the expanded higher‑rate ranges set by the new law. 4
- If you’re an employer, consider using or expanding §45F programs starting in 2026 to leverage the higher annual credit caps for on‑site care, contracts with providers, or resource/referral services. 7
Sources
1 – IRS Newsroom – IR-2024-216 📄 Summarize
2 – IRS – Publication 503 Child and Dependent Care Expenses 📄 Summarize
3 – IRS Credits and Deductions – Tax benefits eligibility chart for families and individuals at a glance 📄 Summarize
4 – One Big Beautiful Bill Act Sec. 70405. Enhancement of child and dependent care tax credit 📄 Summarize
5 – Tax Foundation 📄 Summarize
6 – IRS – Publication 529 Miscellaneous Deductions 📄 Summarize
7 – Rev. Proc. 2025-32 📄 Summarize
8 – IRS.gov – Employer-provided childcare credit 📄 Summarize
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