By David T. Barton and David Sieck | Thoughts on Innovation
On July 4, President Donald Trump signed “One Big Beautiful Bill” (that is its actual name) into law.
This budget reconciliation legislation includes several provisions that employers should know about. We are providing this brief, employer-focused summary for those who don’t want to read the bill’s nearly 900 pages.
Enhanced Employer-Provided Childcare Credit
The bill increases the tax credit for employers who provide childcare assistance to $500,000 ($600,000 in the case of an eligible small business) from the previous $150,000 threshold, thus helping address the challenges facing working parents. The measure is intended to encourage employers to add childcare benefits in an effort to reduce absenteeism and increase retention.
Paid Family and Medical Leave Tax Credit
The bill extends and enhances the tax credit for employers offering paid family and medical leave. Again, the goal is to encourage employers to provide or expand paid leave benefits, with the aim of promoting families and improving talent attraction and retention.
Expanded 529 Account Usage
The bill allows 529 education savings plans to cover expenses for postsecondary industry-recognized credentialing programs for employees and the related continuing education to maintain the credential. The goal is to support employee upskilling and reskilling initiatives, aligning workforce skills with evolving business needs.
Dependent Care FSA Increase
In addition to expanding the employer-provided childcare credit, the bill also increases the dependent care FSA limit for employees to $7,500 ($3,750 for married couples filing separately). This change provides employees with the ability to set aside a greater amount of pre-tax dollars for childcare, with the goal of reducing the childcare cost burden on working parents.
Permanent Employer Student Loan Repayment Exclusion
The bill makes permanent the exclusion of employer-paid student loan repayments from employees’ taxable income (I.R.C. Section 127), with adjustments for inflation. This is employer-funded student loan forgiveness and is a valuable benefit to employees, aiding in recruitment and retention efforts.
Editor’s Note: David T. Barton and David Sieck are attorneys in Fennemore’s Employment & Labor practice group.
