Employer & Employee Child Care Tax Resources
Federal and state tax programs may offer financial incentives to employers and employees who support childcare benefits in the workplace. Understanding these options can help businesses make informed decisions that align with their workforce needs.
Child & Family Resources provides general information to help employers explore available tax-related options. Employers are encouraged to consult with a qualified tax professional to determine eligibility and implementation.
TAX BENEFITS FOR CHILDCARE EMPLOYER
On-Site or Employer-Supported Child Care
Employers may be eligible for federal tax incentives when offering certain childcare benefits to employees. These incentives are designed to help offset the cost of supporting access to child care in the workplace.
Learn more about federal employer child care tax credits:
https://www.irs.gov/businesses/small-businesses-self-employed/employer-provided-childcare-credit
Contracted Child Care Services
Some employers choose to partner with child care providers or organizations to help support employee child care needs. Certain federal tax incentives may be available for these types of arrangements.
https://www.irs.gov/businesses/small-businesses-self-employed/employer-provided-childcare-credit
Supporting Child Care Access
Employers may also choose to support employees by connecting them with child care resource and referral services that assist families in locating care that meets their needs.
https://www.irs.gov/businesses/small-businesses-self-employed/employer-provided-childcare-credit
FREE TAX PREPARATION RESOURCES
Some individuals may qualify for free tax preparation assistance through the IRS Volunteer Income Tax Assistance (VITA) program. Eligibility requirements vary.
- IRS Volunteer Income Tax Assistance (VITA) web site
- IRS infographic on VITA services
- Locate a local VITA office
ADDITIONAL RESOURCES
- Employee Child Care Tax Incentives – Federal & State Tax Incentives
- Employer Child Care Tax Incentives 2022 – Expanding the availability & affordability of childcare
- IRS Publication 503, Child and Dependent Care Expenses
- IRS Instructions to fill out Form 2441, Child and Dependent Care Expenses
- IRS Brief Description of the Child and Dependent Care Tax Credit and FAQs
- New Jersey Child Care Tax Credit
- The Business Case for Early Education Investments – Childcare as an economic driver for new jersey
TAX SAVINGS FOR CHILDCARE EMPLOYEES
Employee Child Care Tax Information
Employees with child care expenses may be eligible for certain federal and state tax benefits. Employers may wish to be aware of these programs as part of workforce planning and benefit discussions.
Dependent Care Assistance Program (DCAP)
Flexible spending accounts that enable employees to set aside up to $5,000 per year in pre-tax earnings for childcare expenses.
https://www.ffyf.org/resources/2024/03/dependent-care-assistance-program-dcap-overview/
Child and Dependent Care Tax Credit (CDCTC)
When you send your employees their W-2 at tax time, remind them if they have children for whom they pay for childcare services, they can claim the CDCTC.
https://www.irs.gov/newsroom/child-and-dependent-care-credit-faqs
New Jersey Child and Dependent Care Credit
For NJ families with income of $150,000 or less, there is a NJ childcare tax credit that is a percentage of the taxpayer’s federal child and dependent care credit.
https://www.nj.gov/treasury/taxation/depcarecred.shtml