Publish Date
Dec 03, 2024
Tax Compass
In today’s competitive job market, offering comprehensive benefits to employees is more important than ever. One benefit that can make a significant difference is providing childcare services. Not only does this support your employees, but it can also offer tax advantages for your business. The Employer-Provided Childcare Credit is designed to incentivize employers to offer childcare services by providing a tax credit of up to $150,000 per year.
To qualify for this credit, an employer must have incurred expenses related to providing childcare services to their employees during the tax year. These expenses can include costs associated with acquiring, constructing, rehabilitating or expanding a qualified childcare facility, and operating expenses such as training childcare workers and offering scholarship programs.
A qualified childcare facility must comply with all state and local regulations and be licensed as a childcare facility. The principal use of the facility should be to provide childcare assistance, and enrollment must be open to all employees of the taxpayer. If the facility is the principal trade or business of the taxpayer, at least 30 percent of the enrollees must be dependents of the taxpayer’s employees. The facility must not discriminate in favor of highly compensated employees.
These expenditures include amounts paid or incurred to acquire, construct, rehabilitate or expand property used as a qualified childcare facility. Operating expenses such as training employees, providing scholarship programs, and offering increased compensation to employees with higher levels of childcare training also qualify.
These expenditures cover amounts paid or incurred under a contract to provide childcare resources and referral services to employees. Like the facility expenditures, these services must not discriminate in favor of highly compensated employees.
Navigating the complexities of tax credits can be challenging, but the benefits of the Employer-Provided Childcare Credit make it a worthwhile endeavor. By investing in childcare services, employers can support their workforce while also enjoying significant tax savings. At Alvarez & Marsal Tax, we specialize in helping businesses maximize their tax benefits. Our team of experts is here to guide you through the process, ensuring that you capture every available credit and deduction.
For more information about this incentive, please contact an A&M representative. You can subscribe to our Tax Compass Credits and Incentives blog here.
https://www.alvarezandmarsal.com/insights/unlocking-benefits-employer-provided-childcare-tax-credit
