Details of Public Law 119-21, section 70405 , One Big Beautiful Bill Act

The child and dependent care credit is for employment-related expenses paid during a taxable year, calculated as a percentage of eligible expenses that are limited to $3,000 for 1 qualifying individual and $6,000 for 2 or more qualifying individuals.

This provision increases the applicable percentage for employment-related expenses from 35 percent to 50 percent. The provision also modifies the two-part phase out applicable to the 50 percent credit rate. Under the first part, the 50 percent credit rate is reduced, but not below 35 percent, by 1 percentage point for each $2,000, or fraction thereof, of adjusted gross income (AGI) above $15,000. Under the second part, the 35 percent credit rate "floor" is reduced, but not below 20 percent, by 1 percentage point for each $2,000 ($4,000 in the case of a joint return), or fraction thereof, of AGI above $75,000 ($150,000 in the case of a joint return).

California automatically conforms to the child and dependent care credit, with modifications and these changes impact the computation of the California credit.

The California child and dependent care credit is allowed based on a percentage of the taxpayer’s federal child and dependent care tax credit for the taxable year. The percentages are:

Credit percentage Credit percentage $40,000 50% Over $40,000 but not over $70,000 43% Over $70,000 but not over $100,000 34% Over $100,000 0%

The credit is limited to household services and care provided within California.

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