Last week, the Republican Study Committee released a legislative framework intended to make the American Dream more affordable. The goal is laudable, and many of the ideas are sound. But among the ideas that should be sent to the chopping block is a proposal to allow stay-at-home parents to claim the Child and Dependent Care Tax Credit (CDCTC).

While it may seem unfair to deny a tax credit to stay-at-home parents, the existing CDCTC in fact makes the tax code fairer, by reducing taxes owed on income used to pay for work-related childcare costs. Extending the CDCTC to families who do not need childcare in order to work would make the tax code less fair, and increase the federal deficit.

The CDCTC is a non-refundable tax credit that is calculated as a percentage of eligible childcare costs incurred by working parents, for children under the age of 13 (or for dependent adults unable to care for themselves). The maximum eligible childcare cost is $3,000 for a family with one child and $6,000 for a family with two or more children. The percentage of this cost which can be claimed as a non-refundable credit depends on the family’s income, with higher percentages for lower income families. But because the CDCTC is non-refundable, the lowest-income families cannot claim the credit at all. Under current law, a taxpayer can only claim the CDCTC if they work or attend school. For a married couples filing jointly, this means both parents must work.

The Republican Study Committee proposal, quoted below, would make families who do not need childcare to work eligible for the credit:

End the Child and Dependent Care Tax Credit (CDCTC) marriage penalty by ending the requirement that both parents work in order to be eligible for CDCTC, supporting stay-at-home parents and young families.

As a result, married-parent families in which one parent stays at home with the children would qualify for the credit, though it is unclear whether the family would be required to spend money on childcare to qualify.

This proposal would make the tax code less fair. Even with the existing CDCTC under current law, the tax code can subject two-earner married parent families to higher taxes than married parent families in which just one parent works, given a constant level of earnings net of work-related childcare expenses. The proposal would further reduce the tax burden of families with a stay-at-home parent, increasing the tax discount they receive relative to families with two working parents.

For example, consider two families (Family 1 and Family 2 in the table below), each with two married parents and two children, in which the primary earner makes $100,000 per year. The second parent in Family 1 chooses to stay home to care for the children and thus incurs no childcare costs. The second parent in Family 2 chooses to work, earning $20,000 per year, which is used to cover $20,000 in childcare expenses (assuming a $10,000 annual cost per child, somewhat smaller than the approximately $13,000 reported by Child Care Aware for 2024).

Table 1. Example of federal income tax liability, married parents with two children, by earnings of parents, tax year 2026

	Family 1: One parent works	Family 2: Both parents work	Difference
Gross earnings
Primary earner	$100,000	$100,000	$0
Secondary earner	$0	$20,000	$20,000
Total	$100,000	$120,000	$20,000
Childcare cost	$0	$20,000	$20,000
Net earnings	$100,000	$100,000	$0
Federal income tax
Current law	$3,240	$3,540	$300
Proposed law	$1,140	$3,540	$2,400

Notes: Table reports the federal income tax liability for the 2026 tax year for Family 1 and Family 2. Each family is a married couple filing jointly with two dependent children under the age of 13. Family 2 has $20,000 of childcare expenditures across both children. For both families, all income accrues from earnings and the family claims no deductions or credits aside from the standard deduction, Child Tax Credit, and (when available) the Child and Dependent Care Tax Credit. Under proposed law, Family 1 is allowed to claim the maximum Child and Dependent Care Tax Credit for two dependent children under the age of 13, as if they had $6,000 in work-related childcare expenditures.

Before accounting for taxes, these two families are equally well off. For Family 1, the second earner has forgone $20,000 in market income to provide what is equivalent to $20,000 in childcare services to the household. For Family 2, the second earner chooses to earn $20,000 in market income and pay someone else to provide the $20,000 in childcare services.

A tax code that treats equally well-off families the same would require that these two families pay the same amount in taxes. However, the family in which the second parent works and pays for childcare (Family 2) owes $300 more in federal income tax. This is because Family 2 is taxed on their additional $20,000 of gross earnings at a 12 percent rate, resulting in an additional $2,400 in federal income tax. While they receive a $2,100 tax break from the CDCTC given their two children in paid childcare, this does not fully offset the tax they owe on their additional gross earnings.

The Republican Study Committee’s proposed law would offer the same CDCTC to Family 1, reducing their federal income tax liability by $2,100. The federal income tax owed by Family 2 would not change. As a result, the tax gap would grow from $300 to $2,400.

Figure 1 shows that this pattern holds for these example families at various income levels. As was the case in the table, families with the same level of earnings net of work-related childcare expenses should face the same tax liability. However, under current law, the two-worker family faces a federal income tax liability that exceeds the liability of the one-worker family, for the entire range of net earnings of at least $18,000. The tax gap (federal income tax liability of the two-worker family minus that of the one-worker family) is $1,000 at net earnings of $20,000, and exceeds $4,000 for net earnings ranging from $30,000 to $47,000. It then begins to fall until reaching a $300 tax gap for net earnings ranging from $66,000 to $113,000, before increasing up to more than $3,000 at net earnings of $180,000.

Figure 1. Federal income tax liability, married parents with two children, by combined earnings net of work-related childcare costs, tax year 2026

Notes: Figure reports the federal income tax liability for the 2026 tax year, for a married couple filing jointly with two dependent children under the age of 13. The family with two working parents has $20,000 of childcare expenditures across both children. For both families, all income accrues from earnings and the family claims no deductions or credits aside from the standard deduction, Earned Income Tax Credit, Child Tax Credit, and (when available) the Child and Dependent Care Tax Credit. Under proposed law, the married couple with one working parent is allowed to claim the maximum Child and Dependent Care Tax Credit for two dependent children under the age of 13, as if they had $6,000 in childcare expenditures.

While the two-worker family in theory would face a lower liability than one-worker families when net earnings fall below $18,000, it is unlikely a family with two workers requiring $20,000 of childcare expenses would have less than $38,000 in gross earnings (and thus less than $18,000 of net earnings). Even at an hourly wage of $10, two full-time, year-round workers would earn approximately $40,000 annually.

The proposed law allowing married parent families with one worker to claim the CDCTC would increase the tax gap beginning with net earnings of $43,000. One-worker families with earnings below $43,000 would not be affected since the non-refundable CTC already eliminates their tax liability and so the CDCTC has no effect. The tax gap would be expanded to at least $2,400 for families with net earnings up to $113,000, and rise further to $4,700 for families with net earnings of around $150,000 or more.

Aside from making the tax code less fair, another issue with the proposal is its cost. The Republican Study Committee estimates it would reduce federal government revenues by $25 billion (presumably over 10 years). The actual amount would depend on details of the proposal, such as the conditions under which parents who do not have work-related childcare expenses could claim the CDCTC, and how much they could claim.

It is also worth noting that, contrary to the justification for the proposal, it would not “end the [CDCTC] marriage penalty” for typical families. Under current law, stay-at-home parents are not eligible for the CDCTC regardless of whether they are married. A single parent who does not work receives no CDCTC, so getting married cannot trigger a loss of the credit. A working single parent who receives the CDCTC may get a larger or smaller credit by getting married (depending on her income and her potential spouse’s income), but as long as she marries a working spouse, she would be unaffected by the proposal.

The only type of family for whom the Republican Study Committee proposal would reduce the marriage penalty is for single working parents who marry a spouse who neither works, looks for work, nor attends school. But even in this case, the loss in the CDCTC upon marriage would be more than offset by the savings in childcare costs assuming the non-working spouse cared for the children.

When both parents in a married couple work, they need someone to care for their young children, and they often need to pay for that care. As with work-related expenses more broadly, families should not be taxed on the money they earn that is used to pay for childcare. Otherwise, they face a higher tax burden than families who do not require childcare to work, despite having the same level of resources. Though imperfect, the CDCTC helps address this problem by offering a non-refundable tax credit that offsets some of the taxes owed on income used to pay for childcare, as explained here by Kyle Pomerleau and here by Alan Viard.

The Republican Study Committee proposal would increase the gap in taxes paid between married parent families with two workers relative to those with one worker despite having the same level of resources. Congress should pay serious attention to the Republican Study Committee framework for making the American Dream more affordable, but it should avoid ideas that make the tax code less fair and increase the federal deficit.