programs (a) Section 129(a)(2)(A) of the Internal Revenue Code of 1986 is amended by striking $5,000 ($2,500 and inserting the applicable limitation amount (half such amount . (b) Section 129(a)(2) of such Code is amended by adding at the end the following new subparagraph: (E) Applicable limitation amount For purposes of this paragraph, the term applicable limitation amount means the amount that is the sum of $10,000 plus $2,000 for each individual described in subparagraph (A) or (B) of section 21(b)(1) with respect to such taxpayer. . (c) Effective date The amendments made by this section shall apply to amounts paid or incurred after the date of the enactment of this section. 4. Household and dependent care credit increased and made refundable (a) In general Subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amending by inserting after section 36B the following new section: 36C. Expenses for household and dependent care services necessary for gainful employment (a) Allowance of credit (1) In general In the case of an individual for which there are 1 or more qualifying individuals with respect to such individual, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the applicable percentage of the employment-related expenses paid by such individual during the taxable year. (2) Applicable percentage defined For purposes of paragraph (1), the term applicable percentage means 50 percent reduced (but not below 35 percent) by 1 percentage point for each $2,000 (or fraction thereof) by which the taxpayer’s adjusted gross income for the taxable year exceeds $15,000. (b) Definitions of qualifying individual and employment-Related expenses For purposes of this section— (1) Qualifying individual The term qualifying individual means— (A) a dependent of the taxpayer (as defined in section 152(a)(1)) who has not attained age 13, (B) a dependent of the taxpayer (as defined in section 152, determined without regard to