As tax filing season gets underway, the IRS is reminding employers who provide childcare services for their employees that they could be eligible for a federal business tax credit for qualified expenditures on a childcare facility or childcare resource and referral services.
The Employer-Provided Childcare Credit offers employers a tax credit up to $150,000 per year to offset 25% of qualified childcare facility expenditures and 10% of qualified childcare resource and referral expenditures, according to a recent reminder from the IRS.
“We’ve heard that some employers may be overlooking this important credit, so the IRS has created a new one-stop shop for information on IRS.gov that provides an easy place to learn more,” IRS Commissioner Danny Werfel said.
The information is available here or by searching “employer childcare” on the IRS.gov website.
Employers should complete Form 8882, Credit for Employer-Provided Child Care Facilities and Services, to claim the credit for a qualified childcare facility and resource and referral expenditures.
The credit is part of the general business credit subject to the carryback and carryforward rule. This means employers may carry back unused credit one year and then carry forward 20 years after the year of the credit. Taxpayers whose only source for the credit is from pass-through entities can report the credit directly on Form 3800, General Business Credit.
The Employer-Provided Childcare Tax Credit homepage on IRS.gov has more information about claiming the tax credit, including requirements for qualified childcare expenditures and qualified childcare facilities.