District of Columbia Child Care Tax Incentives
Current for 2026 Tax Year • Last Updated: January 24, 2026
Strategic 45F stacking for DC employers and Small Business Coalitions
The 2026 DC Reality: Federal Only (But Smart Strategy Exists)
DC does not have a general employer child care tax credit. However, DC's unique child care landscape offers strategic opportunities.
⚠️ Important Clarification
DC does NOT have a general employer child care tax credit. If you've seen claims of "various DC employer credits," this is misleading. The "Keep Child Care Affordable Tax Credit" is for parents (individuals), not employers. DC actually taxes businesses to fund child care (via the Early Childhood Educator Pay Equity Fund) rather than giving credits.
Claim a tax credit for 40% (Large Business) or 50% (Small Business) of qualified child care expenses, up to $600,000 annually.
No general employer credit exists. DC is a "Federal Only" jurisdiction for employer child care tax benefits.
🎓 The DC Advantage: Universal Pre-K (FREE for 3 & 4 Year Olds)
DC has the highest Universal Pre-K participation rate in the country. Pre-K is FREE for all 3- and 4-year-olds. Stop paying for what the government gives for free! Smart DC employers focus their 45F dollars on the Infant/Toddler Gap (ages 0-3) where employees are hurting the most.
💰 The "Tax on Business" Context
DC is unique: it funds child care by taxing businesses, not just incentivizing them. The Early Childhood Educator Pay Equity Fund (which boosts teacher salaries to match public school teachers) is funded partially by tax increases on high-income earners and businesses. So instead of "You get a tax break," the DC reality is often "You're already paying for the public system via taxes."
🏢 Niche: Commercial Property Tax Credit
There have been niche credits for property owners who lease space to child care centers at below-market rates. This is for landlords, not general employers. If you own commercial property, this might apply.
💡 DC Strategy: Target the Infant/Toddler Gap
Focus your 45F dollars on ages 0-3. DC already provides free Pre-K for 3 and 4 year olds. Use the federal 45F credit (40-50%) to subsidize infant and toddler care, where costs are highest ($17K+/year) and the government doesn't provide free coverage.
DC-Specific Example: The "Infant/Toddler Focus" Strategy
A federal contractor in Washington, DC with 250 employees focuses child care benefits on infants and toddlers (ages 0-3), since DC already provides free Pre-K for 3 and 4 year olds.
| Expense Category | Annual Investment | Federal 45F Credit (40%) | DC Credit |
|---|---|---|---|
| Infant/Toddler Subsidies (0-3) | $300,000 | $120,000 | $0 |
| Provider Contracts (0-3 focus) | $150,000 | $60,000 | $0 |
| Referral Services | $20,000 | $2,000 (10% rate) | $0 |
| Total | $470,000 | $182,000 | $0 |
🏢 The Smart DC Strategy
Total Credits: $182,000 (39% of investment). By focusing on infant/toddler care (ages 0-3) instead of trying to subsidize all ages, this employer avoids paying for what DC already provides free (Pre-K for 3-4 year olds). The federal 45F credit provides the only tax benefit—there is no DC employer credit to add.
💡 Why This Matters
Infant care in DC costs $17,000+/year—among the highest in the nation. This is where employees struggle most. By targeting 45F dollars at ages 0-3, you maximize impact where it's needed most, while letting DC's Universal Pre-K handle ages 3-4 for free.
District of Columbia Compliance & Resources
📋 Licensing Requirements
All child care facilities must be licensed by the DC Office of the State Superintendent of Education (OSSE). This applies to both center-based and family child care homes.
DC OSSE →💼 DC Employer Child Care Tax Credits
DC provides various tax credits for employers who support child care. Consult with a DC tax professional to determine eligibility and application procedures.
DC Tax Incentives →📄 Required Federal Form
File IRS Form 8882 with your federal business tax return to claim the Section 45F credit. DC generally conforms to the federal tax code, but consult a professional for specifics.
IRS Form 8882 →🤝 Local Support
Employers in DC can partner with local organizations to find and vet qualified child care providers.
Local DC Resources →District of Columbia Child Care Landscape
Why DC Employers Are Investing in Child Care
DC's high cost of living and competitive labor market make child care benefits a powerful recruitment and retention tool. With the enhanced Section 45F credit now covering up to 50% of costs, DC employers can offer meaningful benefits while significantly reducing their net investment.
Employers in these major DC neighborhoods are leading the way in child care benefits:
- Georgetown – Professional services and hospitality
- Capitol Hill – Government and non-profit
- Dupont Circle – Professional services and retail
- U Street – Tech and creative industries
- Navy Yard – Defense and federal contracting
Qualified Intermediary Platforms for 45F
Under the One Big Beautiful Bill Act (OBBBA) 2026 updates, employers can now claim Section 45F credits for expenses paid to qualified intermediary service providers. These platforms help connect employees with licensed child care and manage benefits administration.
Child Care Marketplace Platforms
Technology platforms that connect employees with vetted, licensed child care providers. Expenses for subscription fees, matching services, and provider network access qualify under 45F.
Benefits Administration Services
Third-party administrators that manage employer child care benefits, including enrollment, provider payments, and compliance reporting. Administrative fees are now 45F-eligible.
Resource & Referral Agencies
Community-based organizations that help employees find quality child care. Contracts with R&R agencies qualify for the 10% referral credit component.
Child Care Subsidy Programs
Employer-funded subsidy programs that offset employee child care costs. Direct subsidies to employees for licensed care are fully eligible for the 40-50% credit.
DC Section 45F FAQ
No. DC does not have a general employer child care tax credit. The "Keep Child Care Affordable Tax Credit" is for parents (individuals), not employers. DC is a "Federal Only" jurisdiction for employer child care tax benefits. Your opportunity is the federal Section 45F credit only.
DC has the highest Universal Pre-K participation rate in the country. Pre-K is FREE for all 3- and 4-year-olds. This means you should NOT use 45F dollars to subsidize care for these ages—the government already provides it for free. Focus your 45F investment on infant and toddler care (ages 0-3).
DC funds child care by taxing businesses, not just incentivizing them. The Pay Equity Fund boosts child care teacher salaries to match public school teachers. It's funded partially by tax increases on high-income earners and businesses. So instead of "You get a tax break," the DC reality is "You're already paying for the public system via taxes."
Infant care in DC costs $17,000+/year—among the highest in the nation. This is where employees struggle most. Since DC provides free Pre-K for ages 3-4, the "gap" is ages 0-3. Target your 45F dollars here to maximize impact where it's needed most.
There have been niche credits for property owners who lease space to child care centers at below-market rates. This is for landlords, not general employers. If you own commercial property and want to lease to a child care provider, this might apply.
Child care must be provided by a facility licensed by the DC Office of the State Superintendent of Education (OSSE). This includes licensed child care centers and licensed family child care homes. The provider must meet all DC licensing requirements.
Ready to Calculate Your DC Savings?
Use our calculator to estimate your federal Section 45F credit. Select "District of Columbia" in the state dropdown to see local guidance.