Tax Savings
Employer and Employee Child Care Tax Savings
The federal tax code offers employers and employees several options to support child care.
For employers, there is a federal tax credit that supports on-site child care or employer-supported child care (e.g., providing support to reduce the cost of child care or cover the cost of child care for employees within licensed community-based programs such as a local child care center or family child care home). Employers can also receive a tax credit if they partner with local Child Care Resource and Referral agencies to help employees find child care. Another way that employers can support parents is to offer Dependent Care Assistance Plans (DCAPs) that help parents set-aside money tax-free that can be used as reimbursement for child care expenses.
For employees, along with W-2 information sent to employees for tax filing purposes, include a note about the federal Child and Dependent Care Tax Credit (CDCTC) so that parents are aware that they can claim a tax credit on their tax return for a portion of their dependent care expenses.
