Smith, Feenstra bill would offer childcare tax breaks to families, small businesses

U.S. Reps. Adrian Smith (R-NE) and Randy Feenstra (R-IA) on Feb. 16 offered a bipartisan bill to make it easier for America’s small businesses to help their employees cover the cost of childcare. 

“American households hit by record inflation in recent years have been forced to make difficult decisions to meet childcare needs,” Rep. Smith said. “Empowering small businesses to expand their offering of competitive benefits to employees with dependents can help small employers attract new talent while also helping workers as they face the challenges of parenthood. 

“This is a win-win supporting both hard-working families and small business growth,” said Rep. Smith, who sponsored the Small Business Dependent Care FSA Opportunity Act, H.R. 7407, alongside original cosponsors Rep. Feenstra and U.S. Rep. Danny Davis (D-IL). 

“On my 36 County Tour, I have met with families, small business owners, and childcare providers who are rightfully concerned about the skyrocketing cost of childcare,” Rep. Feenstra said. “Coupled with inflation, parents are struggling to find affordable childcare options that fit into their schedules and careers.”

In fact, according to the 2023 Bureau of Labor Statistics Employee Benefits Survey, only 27 percent of employees of small businesses with fewer than 100 employees have access to Dependent Care Flexible Spending Accounts (DCFSA).

DCFSA allow single filers and married couples filing jointly to contribute up to $5,000 per year to an employer-provided account, pre-tax, to help pay for the childcare costs of dependent children under the age of 13 or for the care of an adult spouse or dependent unable to work or care for themselves, according to a bill summary provided by the lawmakers.

If enacted, H.R. 7407 would create a new tax credit for small businesses with up to 100 employees for the start-up costs of offering DCFSA as an employee benefit, the summary says.

“It can be harder for small businesses — which employ the vast majority of Americans — to offer the same types of benefits as larger companies,” Rep. Feenstra said, “but with smart policies like this, we can level the playing field and lower childcare expenses for our families.”