Employer-Provided Childcare Tax Credit

The IRS announced the launch of a new page on IRS.gov explaining the employer-provided childcare tax credit, an incentive for businesses to provide childcare services to their employees. This tax credit is designed to help employers cover some of the associated qualified childcare facility and resource and referral expenditures.

Background

The amount of the employer-provided childcare tax credit for a given tax year is the sum of 25 percent of the qualified childcare expenditures and 10 percent of the qualified childcare resource and referral expenditures incurred by the taxpayer for the tax year. The maximum amount of the credit allowable in any given tax year is $150,000.

Eligibility. To be eligible for the credit, an employer must pay or incur qualified childcare expenditures during the tax year to provide childcare services to employees. Qualified expenditures for the employer-provided childcare tax credit are amounts paid or incurred:

• to acquire, construct, rehabilitate or expand property that is to be used as a qualified childcare facility of the taxpayer;
• for the operating costs of a qualified childcare facility, including the costs related to the training of employees, scholarship programs, and providing increased compensation for employees with high levels of childcare training; or
• under a contract with a qualified childcare facility to provide childcare services to the taxpayer's employees.

A qualified childcare facility is a space that meets the requirements of all applicable laws and regulations of the state or local government where it is located. This includes the licensing of the facility as a childcare facility.

Reporting. The credit is part of the general business credit subject to the carryback and carryforward rule. This means employers may carryback unused credit one year and then carryforward 20 years after the year of the credit. Additionally, taxpayers whose only source for the credit is from pass-through entities can report the credit directly.

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Please contact our office for more information on the employer-provided childcare credit and we can help determine your eligibility. We are here to assist you.