H.R. 1067 — LITTLE Act of 2025

This section establishes the short title of the Act as the “Lowering Infant and Toddler Tuition for Learning and Education Act of 2025” or the “LITTLE Act of 2025.”

This section establishes a new childcare provider startup credit under section 45BB of the Internal Revenue Code of 1986, allowing a qualified taxpayer to claim a credit equal to 30% of qualified childcare startup expenses paid or incurred during the 2-year period ending on the last day of the taxable year to establish and operate a childcare service. As background, the credit is available only to taxpayers that provide childcare services in compliance with applicable State or local requirements and that served 2 or more children for a significant portion of the taxable year. The credit is capped at $10,000 per taxpayer over all taxable years, and no credit is allowed for any expense that is also deducted or credited under another provision of the tax code. This section also adds the credit to the general business credit under section 38(b)(42), and applies the amendments to expenses paid or incurred after the date of enactment.

This section establishes a new Internal Revenue Code section 36C to replace and expand the household and dependent care credit, allowing a credit equal to 50 percent of employment-related expenses, reduced by 1 percentage point for each $2,000 of adjusted gross income above $15,000, but not below 35 percent. It defines a qualifying individual as a dependent under age 13, a dependent who is physically or mentally incapable of self-care, or a similarly incapable spouse, and it limits eligible expenses to household services and care needed to enable the taxpayer to work, subject to rules for care outside the home and dependent care centers. It increases the maximum expenses that may be taken into account to $7,500 for 1 qualifying individual and $15,000 for 2 or more qualifying individuals, from the prior law limits of $3,000 and $6,000, respectively, and it raises the deemed earned income for a student or incapacitated spouse to $250 per month or $500 per month, from $250 and $500 under prior law, while also making the credit refundable by allowing it to be claimed against tax without the prior nonrefundable structure. It further indexes the dollar amounts in the section for inflation for taxable years beginning after 2024.