2026 Section 45F Child Care Tax Credit Calculator

🧮

Calculate Your Tax Credit

Business Size Small businesses receive enhanced credit rates

Your State Select a state to see if additional state credits apply

Primary Expense Category Category affects whether you get the 40-50% rate or the 10% referral rate

Annual Qualified Child Care Expenses ($) Include all qualified expenses: provider contracts, subsidies, facility costs ⚠️ Note on Reasonable Costs: Qualified expenses must be "reasonable and necessary" business expenses. While premium care is eligible, costs significantly exceeding market norms should be reviewed by a tax professional.

Resource & Referral Expenses ($) Include platform/intermediary fees used to locate care

Number of Employees with Children Optional: For per-employee cost analysis

💡 Did You Know?

Employers lose an estimated $82 billion annually in productivity due to child care breakdowns. The average employer loses over $9,000 per working parent each year.

📊

Your Tax Credit Summary

Enter your information and click "Calculate" to see your estimated tax credit savings.

Section 45F in Action: 2026 Scenarios

🏢 On-Site Facility (Large Employer)

Setup: 800 employees; 50-slot on-site center.

Annual Cost: $800,000
2026 Tax Credit: $320,000 (40% rate)
Business Impact: Dramatic reduction in turnover for utilizing parents.

💻 Managed Benefits (Mid-Sized)

Setup: 500 employees; backup care & referral services.

Investment: $35k (Backup) + $24k (Referral fees)
2026 Tax Credit: $16,400 total savings
Business Impact: Eliminates productivity loss when primary care fails.

🤝 Small Business Coalition

Setup: 5 small businesses (1,000 employees total).

Investment: $3,000/year stipend for 200 parents
Total Spend: $600,000
2026 Tax Credit: $300,000 (50% small biz rate)

The Business Case: Why Section 45F is a Growth Strategy

Investing in child care isn't just a benefit—it's a high-yield investment in your workforce.

125% ROI Potential

Industry leaders like Patagonia report ROI of up to 125% when accounting for intangible benefits like employee engagement.

$82B Annual Productivity Loss

Employers lose an estimated $82 billion annually due to child care breakdowns. Section 45F helps combat this.

100% Retention Rates

Companies with on-site or contracted care see significantly higher return-to-work rates for mothers following parental leave.

No Job Lock Talent Mobility

Providing stable care options ensures your best talent stays productive, rather than being forced to leave due to high costs.

Section 45F at a Glance

40-50% Credit Rate on Qualified Expenses

$600K Maximum Annual Credit (Small Biz)

$500K Maximum Annual Credit (Large Biz)

Jan 2026 Enhanced Credits Take Effect

🏢 Large Businesses

Companies with $31M+ average annual gross receipts qualify for a 40% credit on qualified child care expenses, up to $500,000 annually.

🏪 Small Businesses

Businesses under $31M in average annual gross receipts receive an enhanced 50% credit rate with a higher cap of $600,000 annually.

🤝 Small Business Coalitions

Small businesses can now form coalitions to pool resources and contract with qualified child care providers, sharing the 50% credit benefits.

📈 Inflation Indexed

The enhanced Section 45F credit is now permanently indexed to inflation, ensuring long-term financial sustainability for employer programs.

What Counts as a Qualified Expense?

Under the One Big Beautiful Bill Act (2026), the definition of "qualified expenditure" is broader than ever.

✓

Facility Infrastructure: Costs for acquiring, constructing, or expanding a child care facility, including renovations and equipment.

✓

Operating Costs: Includes wages for child care professionals, training, and professional development scholarships.

✓

Provider Contracts: Payments to licensed third-party programs, including home-based providers and child care centers.

✓

Resource & Referral: Costs incurred helping employees find care in child care deserts (eligible for a 10% credit, up to $200K).

✓

Intermediary Services: NEW: Fees paid to qualified technology platforms and intermediaries that streamline benefit administration and finding care.

✓

Child Care Subsidies: Direct subsidies or stipends paid to providers on behalf of employees to reduce their out-of-pocket costs.

Section 45F Child Care Tax Credit FAQ for 2026

What is the Section 45F Child Care Tax Credit?

Section 45F is a federal employer-provided child care tax credit that has been dramatically enhanced under the One Big Beautiful Bill Act, signed into law July 4, 2025. It allows businesses to claim a tax credit of 40-50% on qualified child care expenses, with annual caps of $500,000-$600,000 depending on business size. The credit directly reduces your federal tax liability dollar-for-dollar.

When does the enhanced Section 45F credit take effect?

The enhanced Section 45F child care tax credit provisions are effective for amounts paid or incurred after December 31, 2025 (tax year 2026 and beyond). Businesses should begin planning now to maximize their credit in the first year.

What's the difference between the old and new Section 45F credit rates?

The credit rate increased from 25% to 40% for larger businesses and 50% for small businesses. Annual caps increased from $150,000 to $500,000 for large businesses and $600,000 for small businesses. The credit is now also indexed to inflation for long-term sustainability.

Who qualifies for the Section 45F Child Care Tax Credit?

Any business entity that pays federal income tax can qualify. Small businesses (under $31M average annual gross receipts) receive enhanced benefits with the 50% credit rate. Multi-employer coalitions are now permitted for small businesses to pool resources.

Can small businesses pool resources under Section 45F?

Yes! The enhanced legislation allows small businesses to form coalitions and pool resources to contract with qualified child care providers. This makes it easier for smaller employers to offer meaningful child care benefits while sharing the costs and administrative burden.

How does Section 45F differ from dependent care assistance plans (DCAP)?

Section 45F is an employer tax credit that directly reduces your business's tax liability. DCAP (Dependent Care Assistance Plan) allows employers to enable up to $5,000 of pre-tax money for child care—either as an employer subsidy, an employee salary set-aside, or a combination of both (as long as the total is $5,000 or less). Businesses can offer both 45F and DCAP simultaneously—they are complementary programs.

What documentation is required for Section 45F compliance?

Required documentation includes proof that employer funding went directly to a state-licensed provider, along with records of all qualified expenses. File IRS Form 8882 annually with your federal business tax return to claim the credit.

Do I need to build an on-site child care center to qualify?

No! While on-site facilities qualify, the enhanced Section 45F now covers a much broader range of expenses including contracts with licensed providers, subsidies paid to providers, resource and referral services, and even intermediary platforms that help employees find care. You don't need a facility to benefit.

What is the "Double Benefit" Rule?

You cannot claim a tax credit and a full business deduction for the same dollar. You must reduce your deductible business expenses by the total amount of the Section 45F credit claimed. This prevents "double-dipping" on the same expenditure.

Can non-profits claim the Section 45F credit?

Generally, No. Section 45F is a non-refundable credit used to offset federal income tax liability. Most tax-exempt organizations cannot use it, unless they are applying it against Unrelated Business Income Tax (UBIT).

Are there rules about Highly Compensated Employees?

Yes. To remain eligible for the Section 45F credit, the child care program must be accessible to all employees and cannot discriminate in favor of "highly compensated" individuals. The benefit must be offered broadly across your workforce.

Understanding the Three Pillars of Child Care Tax Policy

Ideally, these provisions work together to ease the burden on both parents and employers.

Policy	Target	Benefit for 2026
Section 45F	Employers	Direct tax credit of 40-50% on childcare expenses (up to $600k).
DCAP (Dependent Care)	Employers & Employees	Up to $5,000 pre-tax for child care (employer subsidy, employee set-aside, or both).
CDCTC	Individuals	A personal tax credit for parents on their individual returns.

Need Some Help?

Have questions about the Section 45F Child Care Tax Credit? Fill out the form below and our team will get back to you.

Name *

Email *

Company

State

Message *

Ready to Maximize Your Section 45F Tax Credit?

The enhanced child care tax credit represents an unprecedented opportunity for employers to support working families while achieving substantial tax savings. Start planning now for 2026.

Calculate Your Savings View Official U.S. Code Section 45F →

Employer Child Care Tax Credit Calculator