Modification of child and dependent care tax credit

(a) Allowance of expenses for youth physical activities Section 21(b)(2)(A) of the Internal Revenue Code of 1986 is amended by striking and at the end of clause (i), by striking the period at the end of clause (ii) and inserting, and, and by inserting after clause (ii) the following: (iii) expenses for youth physical activities (within the meaning of section 213(d)(12)).. (b) Exception to camp rule Section 21(b)(2)(A) of such Code (as amended by subsection (a)) is amended by striking Such term and inserting Except in the case of expenses described in clause (iii), such term. (c) Dollar limitations Section 21(c) of such Code is amended to read as follows: (c) Dollar limit on amount creditable (1) In general The amount of the employment-related expenses incurred during any taxable year which may be taken into account under subsection (a) shall not exceed— (A) if there is 1 qualifying individual with respect to the taxpayer for such taxable year, $4,000, or (B) if there are 2 or more qualifying individuals with respect to the taxpayer for such taxable year, $7,000. (2) Reduction The amount determined under paragraph (1) shall be reduced by the aggregate amount excludable from gross income under section 129 for the taxable year.. (d) Effective date The amendments made by this section shall apply to taxable years beginning after December 31, 2025.