Current IRS policy allows for up to 35% of qualifying expenses related to daycare with a maximum of $3,000 for one child or dependent, or $6,000 for two children or dependents.
Daycare should be fully tax deductible with no cap. This incentivizes expanding the family, which guarantees a future tax base, and also frees up discretionary spending for the American household which would stimulate the economy.
Current private daycare costs far exceed the current amount allowable for deduction. For example, having one child in full-time daycare in the Midwest costs between $12,000-$15,600 per year. Right now the IRS will allow $3,000 x .35 or $1,050 for a deduction. This discrepancy is glaring, and disincentivizes procreation.