The budget bill that President Donald Trump signed into law on July 4 will extend tax cuts enacted during his first term that had been set to expire, while making major cuts to social service programs like Medicaid and the Supplemental Nutrition Assistance Program.
At the same time, it deepens investments in certain types of employer-provided benefits, such as dependent care assistance programs, paid family and medical leave, and student loan repayments.
We’ve highlighted a few provisions within the 900-page law that may prove relevant to HR pros.
Dependent care FSAs. Starting Jan. 1, 2026, the annual amount that employees can contribute to a flexible-spending account for dependent care expenses will increase from $5,000 to $7,500, or to $3,750 for married individuals filing their taxes separately.
FSAs, which allow employees to make pre-tax contributions toward expenses like daycare and preschool, are by far the most common family care benefit employers offer, according to SHRM.
The change marks the first permanent increase to this spending cap since 1986.
Employer-provided childcare credit. Employers can currently claim a tax credit of up to $150,000 to offset 25% of expenses related to childcare for their workers.
This credit will go up to $500,000 a year, with the share of qualifying expenses employers can claim rising to 40%. Eligible small businesses will be able to deduct 50% off their childcare costs, for a maximum credit of $600,000. The expanded credit will kick in on Jan. 1, 2026.
Advocates and policy experts in the caregiving space had been calling for this credit—which was originally enacted in 2001—to be updated. At a SHRM panel last year, Brian Gutman, VP of public policy and government relations for childcare company the Learning Care Group, called it “important” but “woefully out of date.”
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PFML tax credit. A credit for employers that provides paid family and medical leave that was set to expire at the end of December will be permanently extended under this law.
Employers will be able to claim credits not only for wages paid to employees who take leave, but also for a share of the premiums paid for workers who have an insurance policy that grants them paid family or medical leave.
Businesses based in states that mandate paid family and medical leave will also be entitled to the credit if they provide more than what’s required; they were previously not eligible to claim it.
Health savings accounts. The law expands the types of services employees with a health savings account or high-deductible health plan can access. It will renew and permanently establish a pandemic-era policy that allows workers with these types of medical plans to use telehealth and other types of remote care services. It will also allow workers with these types of plans to access direct primary care with monthly premiums totaling $150 or less.
Student loan repayments. A policy that allows employers to contribute up to $5,250, tax-free, toward an employee’s student loans, will become permanent under this law. It will also be adjusted for inflation after 2026.