Employer-provided child care credit: Tax year 2025 and earlier

If you're an employer, you may be eligible for the employer-provided child care credit under Section 45F of the Internal Revenue Code (IRC).

Claiming credit for expenditures paid or incurred after December 31, 2025? Go to Employer-provided child care credit: Tax year 2026 and later.  

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How it works

For amounts paid or incurred before January 1, 2026, the credit equals the sum of 25% of qualified child care expenditures and 10% of qualified child care resource and referral expenditures for the taxable year. However, the credit allowable for any tax year cannot exceed $150,000.

Who is eligible

To be eligible for the credit, a taxpayer must have paid or incurred qualified child care expenditures or qualified child care resource and referral expenditures during the tax year to provide child care services to employees.

Qualified child care facility

A qualified child care facility is a facility that meets the following conditions:

  • Its principal use must be to provide child care assistance (unless the facility is also the principal residence, within the meaning of IRC Section 121, of the operator of the facility), and
  • It must meet the requirements of all applicable laws and regulations of the State or local government where it is located.  This includes the licensing of the facility as a child care facility.

There are special rules for qualified child care facilities that apply with respect to a taxpayer, meaning, even if the two conditions are otherwise met, for a facility to be treated as a qualified child care facility, certain conditions must be met:

  • Enrollment in the facility is open to employees of the taxpayer during the taxable year,
  • If the facility is the principal trade or business of the taxpayer, at least 30% of the enrollees are dependents of employees of the taxpayer, and
  • Use of the facility (or the eligibility to use the facility) does not discriminate in favor of highly compensated employees (within the meaning of IRC Section 414(q)).

Qualified child care expenditures

Qualified child care expenditures are amounts paid or incurred:

  • To acquire, construct, rehabilitate, or expand property that is:
    • To be used as part of a qualified child care facility of the taxpayer,
    • Depreciable (or amortizable), and
    • Not part of the principal residence (within the meaning of IRC Section 121) of the taxpayer or any employee of the taxpayer;
  • To operate a qualified child care facility of the taxpayer (this includes costs related to training employees, providing scholarship programs, and providing increased compensation to employees with higher levels of child care training); or
  • Under a contract with a qualified child care facility to provide child care services to employees of the taxpayer.

Qualified child care expenditures do not include expenses in excess of the fair market value of such care.

Qualified child care resource and referral expenditures

Qualified child care resource and referral expenditures are amounts paid or incurred under a contract to provide child care resource and referral services to employees of the taxpayer. The provision of the services (or the eligibility to use the services) must not discriminate in favor of highly compensated employees (within the meaning of IRC Section 414(q)).

How to claim the credit

To claim the credit, use Form 8882, Credit for Employer-Provided Childcare Facilities and Services.

No double benefit allowed

Where the credit is determined with respect to a qualified child care facility based on expenditures made to acquire, construct, rehabilitate, or expand the facility, taxpayers must reduce the basis of the facility by the amount of the credit determined.

Taxpayers may not claim any other deduction or credit for the portion of expenditures used to determine this credit.

Recapture of credit

Taxpayers may have to recapture part or all of the credit if, before the 10th tax year after the tax year in which their qualified child care facility is placed in service, the facility ceases to operate as a qualified child care facility or there is a change in ownership of the facility. However, a change in ownership will not require recapture if the person acquiring the interest in the facility agrees, in writing, to assume the recapture liability. In the event of such an assumption of liability, the person acquiring the interest in the facility shall be treated as the taxpayer for purposes of assessing any recapture liability (computed as if there had been no change in ownership).

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Page Last Reviewed or Updated: 03-Jun-2026