Centering Families in the U.S. Tax Code
January 2025
Authors: Mario Cardona, Linda Smith, and Dr. Shantel Meek
This brief reviews existing levers in the tax code and provides a set of recommendations to craft a family first tax policy. Congress should broaden the pool of families eligible for benefits, remove barriers to tax credits’ use, and make it simple for every eligible family to navigate the process of securing benefits. Congress should consider expanding the child tax credit, especially for those families with children who are not yet school-aged, so that we can move closer toward eliminating child poverty. It should preserve and optimize those credits dedicated to helping families pay for child care. For businesses, Congress should address the existing shortcomings of 45F by making the credit more generous, particularly for small businesses. Congress can also tap into other parts of the code to spur child care supply in Opportunity Zones and support the early educator workforce through tax breaks.
Suggested citation:
Cardona, M., Smith, L., & Meek, S. (January, 2025). Centering Families in the US Tax Code. The Children’s Equity Project at Arizona State University. https://cep.asu.edu/resources/Centering-Families-in-the-US-Tax-Code.
How could tax policy better support families with young children?
Raising young children can bring significant financial pressure, especially when families need child care to work or look for work. Centering Families in the U.S. Tax Code examines federal tax policies that can help with these costs, including the Child Tax Credit, the Child and Dependent Care Tax Credit, employer child care benefits, and incentives to expand the supply of care.
The report recommends making tax benefits easier for eligible families to access and more useful to families with lower incomes. Its proposals include a larger, fully refundable Child Tax Credit for families with children under six; improvements to tax benefits for child care expenses; stronger incentives for employers, particularly small businesses, to provide child care benefits; and tax policies that support early educators and child care supply.
Frequently Asked Questions
The report proposes a fully refundable Child Tax Credit that would provide $6,000 for children under six. It recommends allowing families to receive some or all of the benefit monthly, rather than waiting until tax filing. This is a policy recommendation in the report, not a description of an existing credit.
The credit helps eligible families offset qualifying care expenses incurred so they can work or look for work. The report argues that its design limits its value for many families with lower incomes and recommends making it refundable and increasing the qualifying expense limits.
The report recommends improving the federal Section 45F tax credit, which provides an incentive for employers to offer certain child care benefits. It calls for a more generous credit, particularly for small businesses.
Yes. Alongside its proposals for families, the report examines ways tax policy could support early educators, including tax breaks and assistance related to education expenses.