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IRS Tax TipsJune 11, 2024

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Issue Number:  Tax Tip 2024-58

Businesses: The Employer-Provided Childcare Tax Credit is worth up to $150,000

The Employer-Provided Childcare Tax Credit is an incentive for businesses to provide childcare services to their employees.

About the tax credit
This tax credit helps employers cover some costs for childcare resource and referral and for a qualified childcare facility. A qualified childcare facility is one that meets the requirements of all laws and regulations of the state or local government in which it’s located.

The credit is worth up to $150,000 per year to offset 10% of qualified childcare resource and referral costs and 25% of qualified childcare facility costs.

Who is eligible
To be eligible for the credit, an employer must have paid or incurred qualified childcare costs during the tax year to provide childcare services to employees.

Qualified childcare costs are:

  • Costs associated with acquiring, constructing, rehabilitating or expanding property used as the taxpayer’s qualified childcare facility.

  • Operating expenses paid by the business, including amounts paid to support childcare workers through training, scholarship programs and providing increased compensation to employees with higher levels of childcare training.

  • Qualified resource and referral costs 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
Employers should complete Form 8882, Credit for Employer-Provided Childcare Facilities and Services, to claim the credit. 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. Taxpayers whose only source for the credit is from pass-through entities can report the credit directly on Form 3800, General Business Credit.

Businesses can find out more at the IRS Employer-Provided Childcare Tax Credit page on IRS.gov including, more information on claiming the credit and the requirements for qualified childcare expenditures and qualified childcare facilities.

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