The Republican party's 'Reconciliation 2.0' legislative framework includes a significant expansion of the child and dependent care tax credit, aiming to eliminate the so-called 'marriage penalty' and provide broader relief to middle- and lower-income families. The proposal would raise the credit’s maximum benefit and adjust eligibility thresholds.
- Maximum credit increases to $4,000 per child under age 7 and $2,000 for ages 7–12
- Disabled dependents would qualify for up to $8,000 annually
- Eligibility extends to $150,000 AGI, with phaseouts starting at $180,000
- Marriage penalty elimination through revised credit structure
- Estimated cost: $110 billion over ten years
- Funding via elimination of select energy tax credits and child tax credit adjustments
The Republican-led 'Reconciliation 2.0' framework unveiled in January 2026 introduces a sweeping overhaul of the child and dependent care tax credit, targeting structural inequities in the current system. Under the proposal, the maximum annual credit would increase from $2,000 per child to $4,000 for children under age 7 and $2,000 for children ages 7 to 12. For dependents with disabilities, the credit would rise to $8,000 annually, reflecting higher care costs. These changes apply to households earning up to $150,000 in adjusted gross income, with phaseouts beginning at $180,000. A central aim of the plan is to eliminate the so-called 'marriage penalty,' where married couples filing jointly often receive less in credit benefits than two single filers with similar incomes. The framework introduces a new tiered credit structure that bases benefits on household income and number of dependents, rather than marital status. The proposal also expands eligibility to include more caregivers, such as grandparents and non-custodial parents, who currently face restrictions. The Congressional Budget Office estimates the measure would cost approximately $110 billion over ten years, funded partly through the elimination of certain energy tax credits and adjustments to the child tax credit phaseout. The plan has drawn support from business coalitions and family advocacy groups, which argue that the changes would reduce the financial burden of childcare and encourage workforce participation, particularly among women. Tax policy analysts note that while the expansion increases benefits for low- and middle-income families, its impact on higher-income households would be limited due to the income-based phaseouts. The legislation remains under discussion in the House and Senate Finance Committees, with a vote expected in the second quarter of 2026 if bipartisan support can be secured.