Senator Cornyn Promotes Working Families Tax Cuts Act

Small businesses would receive an even larger tax credit than other employers — 60% of child care expenditures (versus 50% for larger firms) up to $600,000 (versus $500,000). This makes it significantly more affordable for small employers to set up or contribute to child care facilities for their workers, helping them compete for talent against larger companies that already offer such benefits.

While not the Child Tax Credit itself, this bill creates a new refundable dependent care credit (Section 36C) that functions similarly for families with children under 13. The credit starts at 50% of up to $5,000 in expenses for one child or $8,000 for two or more, phasing down for higher incomes. Making the credit refundable means low-income families who owe little or no federal tax can still receive the full benefit as a refund check — a major improvement over the current nonrefundable credit.

Low-income working families who already benefit from the Earned Income Credit would see an additional boost from the new refundable dependent care credit. Because the current child and dependent care credit is nonrefundable, many low-income families get little or nothing from it. Making it refundable means these families could receive real cash back to offset child care costs, stacking on top of their existing EITC benefits.

Adults and children who are physically unable to care for themselves qualify as dependents under this bill's expanded refundable credit. Families caring for a disabled spouse or dependent of any age — not just children under 13 — can claim up to $5,000-$8,000 in care expenses at a credit rate starting at 50%. This is a meaningful improvement over the current nonrefundable version of the credit.

Families caring for individuals with cognitive or developmental disabilities who cannot care for themselves are explicitly covered as qualifying dependents under the new refundable credit. This helps offset the often-substantial costs of day programs or in-home care that enable family members to work. The refundability feature is especially important since many of these families have lower incomes.

The bill includes a special rule for spouses who are full-time students: they are treated as if they earn $250-$500 per month for purposes of the earned income requirement. This means a family where one parent works and the other is in school full-time can still claim the full dependent care credit, helping student-parents afford child care while they complete their education.