The Employer Provided Childcare Tax Credit offers a significant financial benefit for companies that help working parents manage childcare costs. In 2025, this tax credit can be worth up to $150,000 each year, making it an important tool for businesses looking to attract and retain talented employees while providing family-friendly support.
What Expenses This Credit Covers
Employers can use this credit to recover a portion of the money spent on offering childcare services to their workforce. Qualified costs include running a licensed childcare center, building or improving childcare facilities, or partnering with trusted providers to help employees find care for their children. To qualify as an eligible facility, the center must follow all state and local laws and be open to employees’ dependents under fair terms.
How Much a Business Can Claim
Companies may claim up to 25 percent of qualified expenses related to owning, constructing, renovating, or expanding a childcare center used by employees. On top of that, employers can claim an additional 10 percent of the costs for providing childcare resource and referral services. Together, these percentages can add up to a maximum annual benefit of $150,000, which helps offset the true cost of offering high-quality childcare support.
Who Qualifies for This Tax Credit
Any business that pays for approved childcare costs during the tax year may be eligible. Qualified expenses include money spent to build, buy, or expand a licensed childcare property, cover operating expenses, offer staff training, provide scholarship programs for childcare workers, or pay higher wages to qualified caregivers. Expenses can also cover fees paid to an outside certified childcare provider under a clear agreement to serve the company’s employees and their families.
How to Claim the Credit
To claim this tax benefit, a business must complete IRS Form 8882 and file it along with its annual federal tax return. This credit is part of the general business credit rules, which allow any unused amount to be carried back one year or forward for up to twenty years. If the credit amount comes solely from a pass-through entity, employers can report it directly using IRS Form 3800. Accurate records of expenses, facility licenses, employee usage, and contracts should be kept to support the claim and prevent any issues during tax review.
Why Companies Should Take Advantage
Providing access to affordable childcare helps businesses build a supportive work environment, boost employee morale, and reduce turnover. Parents with dependable childcare are more focused at work and less likely to miss days. By using this tax credit, companies can ease the financial burden of offering this valuable benefit, while positioning themselves as a desirable employer for skilled workers who value family support in the workplace.
How to Maximize the Benefit
Employers should carefully plan childcare investments and review expenses each year to claim the maximum allowed amount. Working with a trusted tax professional can help identify all qualified costs and ensure that proper forms are filed on time. Staying updated on tax law changes will also help businesses make the most of this credit, which could expand further in the future to support even more families.
Additional Resources
For detailed information and step-by-step instructions, businesses can visit the official IRS website to find the latest guidance and downloadable forms. Reviewing this information before tax filing will help ensure that every eligible dollar is claimed correctly and that all requirements are met.
Disclaimer
This article is for general information only. Employers should consult a tax advisor or review current IRS rules before making any financial or tax filing decisions related to the Employer Provided Childcare Tax Credit.
