Child Care Availability and Affordability Act

Increased Support for Employers: The bill increases the amount of qualified child care expenditures taken into account from 25 percent to 50 percent (Section 2(a)). It also raises the maximum credit amount from $150,000 to $500,000 (Section 2(b)).

Enhanced Benefits for Small Businesses: Small businesses receive even higher benefits, with the credit increasing to 60 percent and the maximum credit amount rising to $600,000 (Section 2(d)).

Flexibility for Shared Facilities: The bill clarifies that a childcare facility is still considered qualified even if it is jointly owned or operated by the taxpayer and others (Section 2(c)).

Increased Assistance for Dependent Care: The amount excludable for dependent care assistance programs is increased from $5,000 to $7,500 (Section 3(a)).

New Tax Credit for Individuals: A new credit is created for employment-related expenses, such as household services or the care of a qualifying individual (Section 4(a)). This credit is calculated at an applicable percentage of 50 percent, which decreases based on adjusted gross income (Section 4(a)(1)-(2)).

Support for Families with Multiple Dependents: The dollar limit for the new credit is higher for those with two or more qualifying individuals, allowing up to $8,000 (Section 4(c)).

Income-Based Reductions in Credit: The tax credit for employment-related expenses is reduced as a taxpayer's adjusted gross income increases (Section 4(a)(2)).

Limits on Credit Amounts: There are specific dollar limits on the amount of employment-related expenses that can be used to claim the credit, capped at $5,000 for one qualifying individual or $8,000 for two or more (Section 4(c)).

Income Restrictions for Credit Eligibility: The credit is subject to an earned income limitation, meaning the amount cannot exceed the individual's (or a spouse's) earned income (Section 4(d)).

Strict Documentation Requirements: To receive the credit, taxpayers must include the name, address, and taxpayer identification number of the service provider, as well as the taxpayer identification number of the qualifying individual (Section 4(e)(9) and (10)).

Requirement for Joint Filing: Married couples are only eligible for the credit if they file a joint return (Section 4(e)(2)).