Tax Tip: Take Advantage of the Employer-Provided Childcare Tax Credit
What is the employer-provided childcare tax credit?
The employer-provided Childcare Tax Credit is an incentive to encourage businesses to provide childcare services to their employees. The tax credit allows businesses to claim a credit of up to $150,000 per year to cover the costs of childcare resources, referrals, and qualified childcare facilities for employees.
Businesses can claim up to:
- 25% of the cost for qualified childcare facilities
- 10% of qualified childcare resources and referral costs
Who is eligible to claim the tax credit?
Employers who pay or incur qualified childcare costs during the tax year to provide childcare services for employees. These costs include
Facility-related costs: Expenses to acquire, build, renovate, or expand a qualified childcare facility. A qualified childcare facility must meet the requirements of all applicable state and local laws and regulations in which it operates.
Operating expenses: Costs associated with running the facility, including training childcare workers, offering scholarships, and compensating staff with specialized childcare training.
Childcare resource and referral services: Fees paid under contract with a qualified provider to help employees find childcare services.
The credit is part of the general business credit, meaning unused amounts can be:
- Carried back one year or
- Carried forward for up to 20 years.
If you would like to learn more about the employer-provided Childcare Tax Credits or to set up a consultation, call Marlies Y Hendricks CPA PLLC at either 716-694-3500 or 910-769-8730.
The above information is of a general nature only and should not be relied upon for specific situations.
