45F Calculator Methodology and Assumptions

Purpose

The 45F.org estimator is an educational planning tool. It applies published 2026 Section 45F percentages and annual caps to amounts entered by a user. It is not a tax return, a legal opinion, an eligibility determination, or a calculation of current-year tax use.

Formula used

Illustrative credit before cap = (qualified child care expenditures × 40%, or × 50% for advisor-confirmed eligible small business status) + (qualified child care resource-and-referral expenditures × 10%).

Illustrative federal credit = the lesser of that result and the applicable annual cap: $500,000, or $600,000 for an eligible small business.

The estimator displays the child care and referral components separately because the statute applies different percentage rates. It does not calculate a state credit.

Inputs expected

Input	How the estimator uses it	What the estimator cannot verify
Rate status	Uses 40% / $500,000, 50% / $600,000, or a conservative shared-arrangement default.	Section 448(c) five-year gross-receipts test, aggregation, entity status, or allocation.
Statutory pathway	Explains the user-selected facility, direct-contract, intermediate-entity, or referral path.	Whether the actual arrangement meets every statutory condition.
Qualified child care expenditures	Applies the selected 40% or 50% rate.	Facility qualification, contracting facts, fair-market value, and documentation sufficiency.
Referral expenditures	Applies the 10% rate.	Whether the service contract and nondiscrimination requirements are satisfied.

Key exclusions and limitations

The estimator does not determine whether an employer has federal income tax liability or the extent to which a credit may be used currently.

It does not calculate general-business-credit limitations, allocations, carryback / carryforward treatment, state incentives, other deductions, basis reduction, recapture, or employee tax results.

It assumes the user has already classified entered costs as qualified under the selected statutory path and that costs do not exceed fair market value.

It does not make cash reimbursements, stipends, platform fees, or backup-care programs qualified merely because they are entered in the calculator.

Version and source policy

Methodology version: 2026.08.15. The site uses the IRS 2026+ Section 45F page and 26 U.S.C. §45F as its primary rule sources. Methodology changes should be logged on the updates and sources page and reflected in the page’s substantive-review date.