Two tax benefits—the child and dependent care tax credit (CDCTC) and the employer-provided child care exclusion—help families pay for work-related child care, but neither does much to assist low-income parents. During the 2016 election, Donald Trump proposed adding three new tax benefits for child care but a better fix would simply eliminate the exclusion. That would save about $1.1 billion a year, which Congress could use to provide child care benefits for families who make too little to take advantage of the current benefits.
The three new child care tax benefits proposed by the president include an expanded credit for low-income families, a deduction for higher income families, and a child care savings account. The Tax Policy Center estimates that the proposal would cost about $11 billion a year, roughly twice the $5.3 billion annual cost of current benefits. The new benefits would make it harder for parents to figure out their best options and would disproportionately benefit high-income families: 70 percent of the tax savings would go to families with income of $100,000 or more.