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2026 employer childcare tax credit

Could childcare benefits work for your business?

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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The federal credit is 40% of qualified childcare expenditures, or 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. Explore state credits.

Eligibility and arrangement requirements apply. Read the IRS’s 2026 guidance.

An eligible-small-business illustration

$20,000Qualified childcare spend
$10,000Potential §45F credit

Illustrative employer cost before other tax effects: $10,000

Illustrative example for an eligible small business assuming expenditures qualify. Actual tax treatment depends on the employer and arrangement. The same expenditure cannot be used for another deduction or credit to the extent prohibited under §45F.

Federal credit only · 2026

Run the numbers for your business.

We can model a business 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.

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This calculator models the 40–50% federal credit only. Combined federal and state credits can reach 80% or more in some states, subject to eligibility, state rules, and caps. Check the state credit guide.

For 2026, the IRS describes a five-year average gross-receipts test of no more than $32 million. Related-business aggregation and other rules matter. This choice is a modeling assumption, not an eligibility decision.

Start 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