Note: This post was last updated on March 12th, 2021.
At brightwheel, we believe that early education is critical for shaping a healthy, thriving society. In addition to its immense impact on child development, early education is also a must for working parents and directly influences employment, equality, and women’s participation in the workforce. Since the start of COVID-19, it’s become increasingly clear how important childcare is. In fact, lawmakers have included provisions for the childcare industry in every COVID-19 relief package, highlighting how vital early education is for rebuilding the economy.
The most recent stimulus bill from the Biden administration, the American Rescue Plan, allocates almost $40 billion in funding for childcare providers along with tax benefits for families with children. The bill was signed into law by President Biden on Thursday, March 11th.
Here’s what childcare providers need to know about the American Rescue Plan and how to best take advantage of each benefit.
$24 billion emergency child care stabilization fund
What it is: The emergency stabilization fund is designed to help childcare providers navigate the challenges of the pandemic without going out of business, and is meant to provide support for nearly half of all providers. This provision will help childcare providers pay for business expenses such as rent, utilities, and payroll. The funding will also help cover costs associated with COVID-19, including safety equipment, smaller staff-to-student ratios, and anything else needed to keep students and teachers safe.
Who qualifies: The fund will assist childcare providers who have been hit the hardest and are in danger of closing. It’s also meant to help providers who closed due to financial challenges during COVID-19 so that they can reopen again.
Providers who receive a grant from the emergency stabilization fund must demonstrate that they do the following while using the funding:
- Uphold policies that follow state, local, and CDC guidelines
- Pay each employee no less than what they were earning on the date of the provider’s submitted application
- Prioritize providing financial relief to families struggling to make tuition payments
How to access this benefit: This funding will be distributed by individual state agencies. Reach out to your local CCR&R agency to find out where and how to apply. Your local CCR&R agency can also help you with the application process if needed.
$15 billion for the Child Care and Development Block Grant program (CCDBG)
What it is: This provision expands the $10 billion CCDBG funding from the December 2020 relief package. State governments can use this additional funding to increase access to childcare and rebuild the supply of childcare providers. The Biden administration has stated that it also hopes this investment will encourage local state governments to prioritize the economic health of the childcare industry moving forward.
Who qualifies: States can use this funding to provide relief for parents who have struggled to afford childcare, including those who have experienced a job interruption during COVID-19. States can also use the CCDBG funds to increase the pay and benefits of childcare staff—especially because many have been working for minimum wage without healthcare benefits during the pandemic.
How to access this benefit: This funding will be distributed by individual state agencies, just like the emergency stabilization fund will be. Reach out to your local CCR&R agency to find out where and how to apply. Your local CCR&R agency can also help you with the application process if needed.
Expansion of the child and dependent care tax credit (CDCTC)
What it is: The American Rescue Plan includes a temporary expanded CDCTC—which provides tax relief for families who spend money on childcare—for one year. Previously, the CDCTC gave families a tax credit worth 20-35% of their childcare costs. With the expansion, families will receive a tax credit as much as half of the amount they spend on childcare, up to $4,000 for one child or $8,000 for two children or more.
The expanded CDCTC is also fully refundable, meaning all families will receive money back, even those in the lowest tax brackets.
Who qualifies: All taxpayers who spend money on childcare for children under the age of 13 qualify. Families making less than $125,000 a year qualify for the full tax credit of 50% of their childcare expenses, while families making between $125,000-$400,000 a year will receive a partial tax credit. The CDCTC can only be used by working parents to cover the costs of work-related childcare expenses.
How to take advantage of this benefit: It could be worth making sure your families know about the expanded CDCTC, especially if their students’ childcare has been affected by financial difficulties.
Expansion of the child tax credit (CTC)
What it is: The American Rescue Plan also includes a temporary expanded child tax credit —a tax credit for each child in the family—for one year. Previously, the CTC was $2,000 for every child. This expansion boosts the CTC to $3,600 for every child under 6 and to $3,000 for every child 6 to 17. The expanded CTC will also be fully refundable, so families in the lowest tax brackets will still be able to receive the full amount.
Who qualifies: All taxpayers with children 17 years old and younger qualify (previously, the cut-off was at 16 years old). Unlike the CDCTC, the CTC can be used by parents for any expenses, not just those associated with raising children.
How to take advantage of this benefit: It could be worth making sure your families know about the expanded CTC, especially if their students’ childcare has been affected by financial difficulties.
At brightwheel, we acknowledge the incredibly important work you’re doing to support children and their families, particularly during this financially difficult time. We are hopeful that lawmakers are continuing to acknowledge the crucial role that childcare and early education play in the nation’s economic recovery.
For more information on how to successfully operate your childcare or preschool during COVID-19:
- Download our free guide, 4 Keys to Building a More Resilient Early Education Center During COVID-19
- Check out our weekly webinars and on-demand trainings
Thank you for everything that you do!
Brightwheel is the complete solution for early education providers, enabling you to streamline your center’s operations and build a stand-out reputation. Brightwheel connects the most critical aspects of running your center—including sign in and out, parent communications, tuition billing, and licensing and compliance—in one easy-to-use tool, along with providing best-in-class customer support and coaching. Brightwheel is trusted by thousands of early education centers and millions of parents. Learn more at www.mybrightwheel.com.