The latest tax bill isn’t just about corporate reform and international compliance — it also delivers meaningful support to families, small businesses, and students. Here’s a quick overview of some of the biggest wins from Chapter 4 of the One Big Beautiful Bill.
Employer-Provided Child Care Credit: Now Bigger, Better, and More Accessible
For businesses helping employees with child care, the tax code just got a lot more generous.
Credit increased to 40% of qualified child care costs (up from 25%)
Small businesses (those with <$25M in average gross receipts) get an even bigger break: 50% credit
New credit cap:
Up to $600,000/year for eligible small businesses
Up to $500,000/year for larger businesses
Indexed for inflation starting in 2027
Other enhancements:
You can now claim the credit even if you partner with a third-party intermediary that contracts with providers.
Joint ownership or operation of a facility won’t disqualify it from the credit.
Bottom line: This provision gives employers more flexibility and more reward for investing in working parents — especially small businesses.
The Adoption Tax Credit: Now Partially Refundable
Adopting a child is expensive — and this credit helps, especially now that up to $5,000 of it is refundable.
That means even if your tax bill is low, you can still get money back.
The refundable portion will increase with inflation starting in 2026.
Indian Tribal governments are now recognized when determining whether a child has “special needs” for adoption credit eligibility.
Effective for tax years after 2024.
Dependent Care Accounts: Bigger Limits Ahead
Section 129 (your Dependent Care Assistance Program, or DCAP) just got an inflation-adjusted facelift:
Old max: $5,000 ($2,500 married filing separately)
New max: $7,500 ($3,750 MFS) — starting in 2026
This increases the tax-free amount that employers can contribute toward dependent care, providing real value to working parents.
The Child and Dependent Care Tax Credit: More Value for More People
The Child and Dependent Care Credit (CDCTC) has been expanded again:
Base credit stays at 50% of expenses (up to $3,000 per child)
Phaseouts start at $15,000 of AGI, but the minimum credit is now locked at 20% for households earning up to $150,000 (joint)
This helps middle-class families get more out of the credit — not just the lowest earners.
Applies starting in 2026.
New Tax Credit for Private School Scholarships (Section 25F)
Here’s a brand-new provision: a $1,700 annual federal tax credit for individuals who donate to approved scholarship-granting organizations that help fund K–12 private school tuition for lower-income families.
Key details:
Scholarships go to kids from households earning up to 300% of area median income
Donations must be made to approved nonprofit organizations
If you also get a state tax credit, it reduces your federal credit (no double-dipping)
The unused portion of the credit can be carried forward up to 5 years
No charitable deduction allowed for the same gift
This is an opt-in program for states, so it’ll only be available where governors (or designated state agencies) choose to participate.
What Should You Do Now?
These changes are phased in across 2025 and 2026, but now is the time to prepare:
Business owners: Talk to your accountant about setting up or expanding employer-provided child care support and DCAPs.
Adoptive parents: Plan your timing to capture the refundable credit.
Philanthropists and parents: Watch for your state’s participation in the new scholarship credit — it could give you a win-win: help kids, reduce your tax bill.
Have questions about how to take advantage of these new provisions?
Let’s talk — our team can help you strategize before these updates take effect.