Child Care Tax Credit: Does Your Employer Provide It?


Every parent understands the value of saving money, so it pays to be “in

the know” at all times. Fortunately, the U.S. Government has taken many strides in the last decade to ensure moms and dads everywhere are getting the much-needed, financial assistance they deserve.

In 2001, the Economic Growth and Tax Relief Reconciliation Act was put into effect, a law that gives tax incentives to businesses that either provide their employees with on-site daycare and/or assist them in locating services in their area. The act was extended as of January 1st, 2013, and sets a number of company eligibility requirements.

Does your business qualify for the credit?

The tax credit comprises 25% of a business’ daycare facility related expenses along with an additional 10% of resource and referral expenditures the company has either paid or incurred during the eligible tax year. The maximum expense cap that can be credited is $150,000, which means businesses spending more than this amount (typically large corporations) on daycare facility costs cannot claim above $37,500. The IRS gives companies three years to claim the credit within three years of their return due date.

The child care tax credit eligibility requirements include: a child care program that fully adheres to the laws and regulations mandated by the company’s state and local governments; the designated facility must be used exclusively for daycare services, program enrollment must be available year-round; a minimum of 30% of all participants (children enrolled) must be verifiable dependents of the company’s employees; the program must not discriminate between employees in any way.

Claimable expenses may be those used to acquire, build, renovate, or expand the qualifying daycare facility, so long as it is amortizable and not the primary residence of any of the employer’s employees. Additionally covered expenses include the cost of training daycare staff and any respective wage increases paid out to these employees.

If your company offers childcare services to its staff, it would be wise to take advantage of the Employer Provided Child Care Tax Credit. You may be eligible for significant expense write-offs, granted you meet the above stipulations.

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