FEDERAL POLICY UPDATE ยท WHAT THE 2025โ26 CHANGES MEAN FOR YOUR BUSINESS
Is this a crisis or is it an opportunity?
Cutting through the national headlines: the core child care programs weren't cut; they were funded and nudged up, and a new tax law put the biggest child care benefits for families and employers in nearly 40 years on the table. Here's what actually happened since January 2025, and where the money is for your program.
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40โ50% EMPLOYER CREDIT: the headline for owners The federal Employer-Provided Child Care Credit (Section 45F) jumped from 25% to 40% of costs, 50% for small businesses, with the cap raised from $150K to $500K ($600K small business). And for the first time, several employers can jointly fund or share one facility and still qualify. Translation: real dollars for local employers to partner with programs like yours. |
โ Employer partnerships just got far more valuable
When a nearby employer helps pay for their team's child care, they now recover 40โ50 cents on the dollar from the IRS, up to $500Kโ$600K a year. The new "shared facility" rule means a handful of small employers can pool together and contract with your program. No one has to build their own center. This is new revenue you couldn't easily access a year ago.
โ Families now have more support for child care costs
Dependent Care FSA: pre-tax limit raised from $5,000 to $7,500 (first increase since 1986). Parents can direct more untaxed income straight to tuition.
Child & Dependent Care Credit: top credit rate rose from 35% to 50% of care costs. Families get more back for choosing licensed care.
Child Tax Credit: up to $2,200 per child, now permanent and inflation-adjusted.
All permanent: these aren't temporary. They're locked in going forward, so you can plan and market around them with confidence.
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What this means for a Colorado family: the "true cost" of infant care ~$19,000 avg. CO infant tuition (center-based, per year) โ ~$2,550 Dependent Care FSA tax savings ($7,500 pre-tax) = ~$16,450 true out-of-pocket care cost And there's more relief on top: the $2,200-per-child Child Tax Credit brings total federal help to roughly $4,750 for a one-infant family, about a quarter of tuition. Lower-income families without a workplace FSA do even better on the credit side (up to 50% of care costs back). Colorado's Universal Preschool adds ~$6,300/year of state support at age 4. FSA savings vary by tax bracket; families should confirm specifics with a tax professional. |
โ Your base funding held, and grew
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$8.83B โฒ $85M Child Care Block Grant (CCDBG) |
$12.36B โฒ $85M Head Start / Early Head Start |
$315M held steady Preschool Dev. Grants (Bโ5) |
Despite a long, noisy budget fight, Congress funded these programs for the full year (signed Feb. 3, 2026). The proposed elimination of Head Start that drove much of the panic did not happen. One honest note for straight talk with parents and lawmakers: these increases are modest and don't fully keep pace with inflation. Much of what people felt as a "cliff" was temporary pandemic (ARPA) money ending on schedule, not a cut to the programs you rely on. Add to this the new Savings accounts that were created that automatically deposit $1,000 into each newborns account (once set up) to help them in the future. www.trumpaccounts.gov and you've got innovation at it's best.
ECEA's bottom lineThe direction of new federal help is toward families and employers (credits, pre-tax dollars, and partnership incentives) rather than a government-run system. That plays to your strengths as a private program serving parents who choose you. We're in the meetings and reading the fine print so you don't have to, and we'll help you turn these changes into enrollments and partnership revenue. |
Don't leave this money on the table. Together we are stronger.
Join ECEA โ coloradoecea.org/join-now
Figures: enacted FY2026 Labor-HHS appropriations (signed 2/3/2026) via First Five Years Fund & CLASP; tax provisions via the One Big Beautiful Bill Act (signed 7/4/2025) per Bipartisan Policy Center, Mercer, Western CPE, and IRS guidance. Shared for member information; not tax advice. ยท ยฉ 2026 ECEA of Colorado.
All the talk of mixed delivery, and the realities are felt across the state by private industry. School districts retaining funding from the CO Preschool Program WHICH NO LONGER EXISTS directly undermines mixed delivery!! CO it's time to stand up and bring equity to the funding structure of the state. ECEA is advocating to have the state stop favoring public programs. It's unfair competition and undermines the viability of businesses that our citizens pour their hearts and souls into!!
Get a free no obligation consultation here: https://ccca.partners.marketing360.com/
Wondering if this will work in your part of the state? We've learned a few things from our members that have tried this out. We can help you to know if this is a good move for you or not. Schedule a conversation with Dawn.
Register for the ECEA Leadership Conference (Sept 25th)
Pro members get one free ticket per pro site and get priority for additional seat purchases. Plus members are prioritized next and the basic members can join in if there are still tickets available. PRO's please register today so that you don't lose your seat!! Get your tickets today!
Details are here: https://www.coloradoecea.org/ecea-leadership-conference
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