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Congress·In Committee·H.R. 2900

Rep. Tenney Introduces Bipartisan PACE Act to Expand Childcare Tax Credits and Raise Savings Limits

PACE Act

11 months ago·View on Congress.gov

Legislative Progress

House
Senate
President
Law

Key Points

  • The bill makes the Child and Dependent Care Tax Credit fully refundable. This is a big deal for lower-income families because it means if the credit is worth more than the taxes they owe, the government sends them the difference as a refund check instead of losing the benefit.

    From policy text

    “by redesignating section 21 as section 36C; and (2) by moving section 36C, as so redesignated, from subpart A of part IV of subchapter A of chapter 1 to the location immediately before section 37 in subpart C of part IV of subchapter A of chapter 1.”
    View in full text
  • The maximum credit rate jumps from 35% to 50% of childcare costs, with the floor rising from 20% to 35%. This means working families can get back a much larger share of what they spend on daycare, preschool, or after-school care.

    From policy text

    “by striking ``35 percent reduced (but not below 20 percent)'' and inserting ``50 percent reduced (but not below 35 percent)''”
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  • The tax-free exclusion for employer-provided dependent care assistance rises from $5,000 to $7,500. This lets parents shelter more pre-tax income to pay for childcare through workplace programs, lowering their overall tax bill.

    From policy text

    “is amended by striking ``$5,000 ($2,500'' and inserting ``$7,500 (half such dollar amount''”
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  • Both the credit amounts and the employer exclusion get automatic inflation adjustments tied to the cost of living, so the benefits keep pace with rising childcare prices in future years.

    From policy text

    “the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting `calendar year 2024' for `calendar year 2016' in subparagraph (A)(ii) thereof.”
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  • All changes take effect for tax years beginning after December 31, 2025, meaning they would first apply when families file their 2026 taxes. The bill is bipartisan, introduced by Rep. Tenney (R) and Rep. Schneider (D).

    From policy text

    “The amendments made by this section shall apply to taxable years beginning after December 31, 2025.”
    View in full text
TaxesLabor Employment

Impact Analysis

Personal Impact

Scores: 1 = low, 5 = highSentiment: -5 to +5 (net benefit)

Milestones

2 milestones2 actions
Apr 10, 2025House

Referred to the House Committee on Ways and Means.

Apr 10, 2025

Introduced in House

What Happens Next

Projected impacts based on AI analysis

2026-01-01

New credit rates and refundability take effect for the 2026 tax year

Families paying for childcare would see larger tax refunds when filing their 2026 taxes (in early 2027). Lower-income families could receive the credit as cash for the first time.

2026-01-01

Employer dependent care exclusion rises to $7,500

Parents enrolled in workplace dependent care flexible spending accounts can set aside up to $7,500 pre-tax (up from $5,000), saving hundreds more on childcare costs starting in 2026.

Source Information

Document Type

Congressional Bill

Official Title

PACE Act

Bill NumberHR 2900
Congress119th Congress
ChamberHouse of Representatives
Latest ActionReferred to the House Committee on Ways and Means.

Sponsor

Cosponsors

(2)
D: 2

Analysis generated by AI. Always verify with official sources.