# The PACE Act: Making Childcare More Affordable

The PACE Act (Promoting Affordable Childcare for Everyone Act) is designed to put more money back in the pockets of working parents by making it easier and more valuable to claim tax credits and deductions related to childcare expenses. Right now, many families struggle with the high cost of daycare, after-school programs, and other dependent care services, and this bill aims to ease that burden through the tax system.

The bill makes three main changes. First, it converts the Child and Dependent Care Tax Credit into what's called a "fully refundable" credit, which is important because it means you can get money back even if you don't owe taxes. Currently, if you don't earn enough to owe federal income tax, you can't benefit from this credit as much. Under this bill, if the credit is worth $2,000 but you only owe $500 in taxes, you'd get the full $2,000—with the extra $1,500 coming as a refund. Second, the bill increases how much of your childcare expenses the credit covers. Instead of covering 20 to 35 percent of your costs, it would cover 35 to 50 percent, meaning the government would help pay for a larger share of what you spend on childcare. Third, the bill raises the limit on how much employers can contribute toward your childcare costs without you having to pay taxes on that benefit—increasing it from $5,000 to $7,500 per year.

All of these amounts would also automatically adjust for inflation each year, so the benefits wouldn't shrink over time as prices rise. The changes would take effect for the 2024 tax year. Overall, this bill would primarily help working parents and families with dependent care needs by reducing their out-of-pocket childcare costs and making sure lower-income families can actually benefit from these tax breaks, not just wealthier families.

PACE Act

Tenney, Claudia

Promoting Affordable Childcare for Everyone Act or the PACE Act This bill modifies the tax credit for expenses for household and dependent care services necessary for gainful employment (known as the Child and Dependent Care Tax Credit) to (1) make the credit refundable, (2) increase the rate for the credit, and (3) require the dollar amounts for such credit to be adjusted for inflation. The bill also increases the amount of employer-provided dependent care assistance which may be excluded from the gross income of an employee and requires the increased exclusion amount to be adjusted for inflation.