Are your benefits a benefit? VensureHR delivers scalable HR solutions for growing businesses including robust, Fortune 500-style benefits your team can actually use. From personalized healthcare packages to easy enrollment, offer more for less.
The recently enacted Republican budget and tax law includes a number of provisions that may prove relevant to employers with working parents in the coming years.
Childcare advocates and lawmakers have wrestled with the question of how big a role the private sector should play in providing support for workers with dependents. Increasingly, employers see benefits like paid family leave and childcare support as a powerful lever for attracting and retaining talent, even if they’re not required to provide them by law.
“There has been significantly more engagement from the business community and from employers in recognizing that childcare is a retention and recruitment issue for their employees,” said Sarah Rittling, executive director of the First Five Years Fund, which advocates for federal policies to boost early learning and childcare. “It affects the entire workforce, and therefore the economy.”
Companies may see an even stronger case for providing perks such as childcare, advocates like Rittling say, thanks to a handful of enhancements to tax credits for employer-provided benefits coming out of President Donald Trump’s “big, beautiful bill.” But some policy experts contend these tax code enhancements don’t go far enough, particularly for industries that tend to employ low-income workers.
Focus on FSAs, 45F. Rittling highlighted two sections of the tax code that her organization lobbied to make more attractive to employers and their workers.
One is a section that allows workers to set aside pre-tax dollars for dependent care expenses such as daycare and summer camp. The budget law contains a provision raising the maximum contribution employees can make to these flexible-savings accounts (FSA) from $5,000 annually to $7,500 a year. It’s the first permanent increase to the spending cap since 1986.
Another is a lesser-known section of the tax code known as 45F, the employer-provided childcare credit, which lets employers write off a certain percentage of qualified expenses they incur from giving their employees childcare.
On Jan. 1 of next year, that credit will go up to 40% of costs, for a maximum credit of up to $500,000 annually, from the current deduction of up to 25% of costs, for a credit of up to $150,000 a year. Eligible small businesses will be able to claim an even higher deduction—50%—for a maximum credit of $600,000.
Dependent care FSAs are a popular employee benefit, with more than half (54%) of employers offering them as of 2025, according to SHRM, but other types of childcare support are less common. While a handful of large employers, like Patagonia, have taken advantage of 45F to help offset the cost of programs such as onsite childcare, historically the tax credit has been underutilized. A Government Accountability Office analysis of 2016 corporate tax returns, for instance, found that less than 1% of businesses claimed it on their returns that year.
Rittling said she hopes more employers will take advantage of 45F now that it’s more attractive and flexible. “One of the criticisms of 45F in particular has been that it was not used,” she said. “You have to get the word out. I think it'll be interesting to learn…what employers are able to do, what kind of innovations come of that, and then how employees are benefiting from it.”
Where gaps remain. Some policy experts expressed skepticism that the budget and tax law will spur more employers to offer the types of benefits—such as paid family leave and childcare—that working families need. Vicki Shabo, senior fellow for gender equity, paid leave & care policy and strategy with the think tank New America, noted that the legislation expands a tax credit for employers that provide paid family and medical leave so multistate employers located in jurisdictions where the benefit is mandated can take advantage of it.
“But the reality is that those employers, like the really blue-ribbon employers, were already providing paid leave benefits to workers nationwide, whether they have to or not,” Shabo said. Rather than incentivize new businesses to give their workers paid family leave, the credit may simply serve as a “tax write-off” for companies that were already willing to provide the benefit, she hypothesized.
Solving the childcare crisis will ultimately require more public sector investment, argued Julie Kashen, a senior fellow and director for women’s economic justice with another think tank, The Century Foundation. In the interim, though, “it is incredibly helpful when employers step up,” she said. “To the extent that parents absolutely need these types of supports and employers are able to provide them, I think that can really help the parents who are able to access those supports.”