Eligible small businesses
The federal credit is 40% for general employers and 50% for eligible small businesses. Combined federal and state credits can reach 80% or more in some states, subject to eligibility, state rules, and caps.
2026 employer childcare tax credit · For HR, benefits and payroll advisors
A practical guide to the 2026 employer childcare credit.
Federal credits cover 40–50% of qualified childcare costs. Combined federal and state credits can reach 80% or more in some states.
Eligibility, caps, and program requirements apply. Federal credit details · State credit guide.
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What’s different in 2026?
Annual small-business cap
The general employer cap is $500,000. These are credit limits, not automatic awards.
Intermediary arrangements
Qualifying contracts can run through an intermediary that contracts with qualified childcare facilities.
For 2026, an eligible small business generally uses the IRC §448(c) gross-receipts test. The IRS states that corporations and partnerships generally satisfy this test for 2026 if average annual gross receipts over the preceding five-year period do not exceed $32 million. Do not assume eligibility solely from headcount or this threshold.
Federal credit only · 2026
Have an employer client who might fit?
We can model a client scenario, identify the practical implementation questions, and help determine whether an employer-sponsored childcare arrangement merits further review.
Enter annual expenditure you expect to qualify. If you are unsure of small-business eligibility, compare both rates.
Resource and referral services have a separate 10% rate and share the annual cap. Do not include those expenses here. This model assumes the full annual cap remains available.
Run a Client Scenario with Care AssemblyStart with the arrangement, then the claim.
Qualified facilities must meet applicable state and local requirements, including licensing. Contracts, employee access, nondiscrimination and fair-market-value limits all matter. Your tax advisor determines the appropriate tax treatment.
This material is for general informational purposes and is not tax, legal, or accounting advice. Eligibility and credit amounts depend on the employer, expenditures, childcare arrangements, and other facts. Employers should consult their tax advisors regarding their specific circumstances.
IRS: employer-provided childcare credit, 2026 and later · IRC §45F