IRS Spotlights Employer-Provided Childcare Tax Credit

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Employer-Provided Childcare Tax Credit

Spotlight on Employer-Provided Childcare Tax Credit

Childcare is often the second largest household expense after rent or mortgage. found 62% of American parents have a hard time finding and affording high-quality childcare. This tax credit is designed to help employers cover some of the qualified childcare facility and resource and referral expenditures associated with providing childcare services to their employees. A qualified childcare facility is one that meets the requirements of all applicable laws and regulations of the state or local government in which it is located.

The IRS is highlighting the use of the Employer-Provided Childcare Tax credit. They have created a page to give all the info. This tax credit encourages employers to provide employees with childcare services. To offset what employers covers, the IRS urges use of this tax credit when possible. The new webpage gives information on the tax incentive for businesses that provide childcare services to their employees.

The basic idea is If you (as an employer) provide childcare services to your employees, you may be eligible for this general business credit. It covers qualified expenditures for a childcare facility and for childcare resource and referral.

The Employer-Provided Childcare Credit offers employers a tax credit up to $150,000 per year to offset 25% of qualified childcare facility expenditures and 10% of qualified childcare resource and referral expenditures. Find details in Internal Revenue Code (IRC) Section 45F.

The credit is an incentive for taxpayers to provide childcare services to their employees.

Who is eligible for the employer-provided Childcare Tax credit?

To be eligible for the credit, an employer must have paid or incurred qualified childcare expenditures during the tax year to provide childcare services to employees. Qualified childcare expenditures are:

  1. Costs associated with acquiring, constructing, rehabilitating or expanding property used as the taxpayer’s qualified childcare facility.
  2. Qualified childcare facility expenditures are operating expenses made by the taxpayer, including amounts paid to support childcare workers through training, scholarship programs, and providing increased compensation to employees with higher levels of childcare training.
  3. Qualified resource and referral expenditures which include amounts paid or incurred under a contract with a qualified childcare facility to provide childcare services to employees of the taxpayer.

How to claim the credit

To claim the credit, use Form 8882, Credit for Employer-Provided Childcare Facilities and Services. The credit amount claimed may not exceed $150,000. You may deduct eligible expenditures that exceed the amount of the credit determined.