The Employer-Provided Childcare Tax Credit: A Guide for Businesses

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As a business owner, you have an opportunity to support your employees and enhance their work-life balance through the Employer-Provided Childcare Tax Credit.

Let’s break down the key details:

What Is the Employer-Provided Childcare Tax Credit?

This tax credit encourages businesses to provide childcare services to their employees. Here’s what you need to know:

1. Credit Amount: Up to $150,000 per year.
   

2. Allocation:

• 25% of qualified childcare facility costs

• 10% of qualified childcare resource and referral costs
  

Eligibility Criteria

To qualify for the credit, consider the following:

1. Qualified Childcare Facility Costs:

• Associated with property acquisition, construction, rehabilitation, or expansion for childcare facilities.

• Operating expenses that support childcare workers (e.g., training, scholarships, increased compensation).
  

1. Qualified Resource and Referral Costs:

• Payments made to qualified childcare facilities for services provided to employees.
  

What Makes a Facility “Qualified”?

Ensure that your childcare facility meets these criteria:

1. Legal Compliance: Adhere to state and local laws and regulations.

2. Principal Use: Primarily provide childcare services (unless it’s also the operator’s principal residence).

3. Employee Access: Open enrollment for employees during the taxable year.

4. Non-Discrimination: No favoritism toward highly compensated employees.
   

Claiming the Credit

1. Complete Form 8882, Credit for Employer-Provided Childcare Facilities and Services.

2. The credit falls under the general business credit, allowing carryback and carryforward.

3. Pass-through entities can report the credit directly on Form 3800, General Business Credit.
   

Remember, investing in your employees’ well-being pays off in productivity and loyalty. Take advantage of this credit and create a supportive workplace!