Employer-Provided Childcare Credit (Section 45F)
Internal Revenue Service
Up to $500,000/year
Credit for employer-sponsored childcare
A federal tax credit for businesses that pay for qualified employee childcare facilities or childcare resource and referral services. Equals 25% of qualified childcare facility expenditures plus 10% of childcare resource-and-referral expenses. The OBBBA 2024 raised the annual cap from $150,000 to $500,000 (or $600,000 for eligible employers). Claimed on Form 8882.
- Funding type
- Tax Credit
- Level
- Federal
- Amount range
- $0 – $600,000
- Realistic amount
- $50,000–$200,000 for mid-size employers with dedicated childcare facilities
- Deadline
- Annual — file with federal tax return (Form 8882)
- Status
- active
- States
- Nationwide
- Payment model
- tax offset
Who qualifies
- Any business entity (C-corp, S-corp, partnership, LLC, sole proprietor) that pays for qualified childcare
- Childcare facility must be principally for employees' dependents and meet applicable state and local licensing requirements
- Expenses must be for qualified childcare facility operation, acquisition, construction, rehabilitation, or expansion — OR for childcare resource-and-referral services under a contract with an unrelated third party
- Employer cannot claim both the credit and a deduction for the same expenses (deduction reduced by credit amount)
- No revenue or employee-count threshold — available to businesses of any size
What it covers
Eligible expenses
- Costs to operate a licensed employee childcare facility (rent, staffing, supplies)
- Construction, acquisition, or renovation of a facility used as an employee childcare center
- Amounts paid under a contract with a licensed childcare facility to provide childcare for employees
- Payments to a third-party childcare resource-and-referral service (10% rate applies)
- Childcare facility rehabilitation or expansion costs
Ineligible expenses
- Childcare subsidies paid directly to employees (those are deductible as compensation, not eligible for this credit)
- Dependent care assistance programs (FSA/DCAP) — governed by Section 129, not Section 45F
- Facilities not licensed under applicable state/local childcare regulations
- The portion of expenses offset by the credit itself (no double-dipping on deductions)
How to apply
-
1
Identify qualified childcare expenditures
Document all amounts paid for: (a) operating or contracting with a licensed childcare facility for employees, (b) acquiring/constructing/rehabilitating a childcare facility, OR (c) paying a third party for childcare resource-and-referral services for employees.
~2 hrs
-
2
Verify childcare facility licensing
Confirm the facility meets all applicable state and local licensing requirements for childcare. Retain copies of licenses. On-site employer-owned facilities and contracted third-party centers both qualify.
~1 hrs
-
3
Calculate the credit
Compute 25% of qualified childcare facility expenditures + 10% of qualified childcare resource-and-referral expenditures. Apply the $500,000 annual cap ($600,000 for eligible employers per OBBBA 2024).
~1 hrs
-
4
Complete Form 8882
Fill out IRS Form 8882 (Credit for Employer-Provided Childcare Facilities and Services). Attach to the business's federal income tax return. Reduce any otherwise-allowable deduction for childcare expenses by the credit amount.
~1 hrs
-
5
Track recapture obligations
If a childcare facility ceases to be used for employees within 10 years of acquisition, a portion of prior credits claimed may be recaptured. Maintain records for 10 years following acquisition of a childcare facility.
~0.5 hrs
OBBBA 2024 raised the cap from $150K to $500K ($600K for eligible employers) — a 3–4× increase. Employers that previously dismissed this credit as too small for their facility costs should recalculate.
Deadline & timing
Claimed each tax year with the business's annual federal income tax return. No pre-approval or separate application. Multi-year contracts with qualified childcare facilities can generate recurring credits.
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Last reviewed 2026. GrantCompass is an independent funding-discovery tool and is not affiliated with any government agency. Always confirm details on the official program page.