Indiana Child Care Tax Incentives
Current for 2026 Tax Year • Last Updated: January 24, 2026
Strategic 45F stacking for Indiana employers and Small Business Coalitions
The 2026 Indiana "Stack"
Indiana employers can achieve a "Double Win" by combining the expanded federal Section 45F credit with the state's Employer Child Care Expenditure Credit (IC 6-3.1-36, created by SEA 2 in 2024).
🚨 CRITICAL: $100,000 Per-Taxpayer Cap
The Indiana credit is capped at $100,000 per taxpayer per year. Even if your 50% calculation exceeds this amount, you cannot claim more than $100,000 in state credits annually.
⚠️ First-Come, First-Served: $2.5M Aggregate Cap
Indiana has allocated only $2.5 million TOTAL for all employers statewide per fiscal year. If 25 large companies claim the max $100k each, the fund is empty. File early—do not assume the money will be there if you wait!
Claim a tax credit for 40% (Large Business) or 50% (Small Business) of qualified child care expenses, up to $600,000 annually.
A 50% credit for qualified child care expenditures (IC 6-3.1-36). Capped at $100,000/year per taxpayer. Non-refundable with carryforward.
🔄 Non-Refundable Credit with Carryforward
The Indiana credit is non-refundable—it can only offset your state tax liability. If your liability is less than your credit, the excess can typically be carried forward (check SEA 2 specifics for exact carryforward period). Don't assume "100% ROI" if your state tax liability is low.
🤝 Indiana Tri-Share Pilot
Indiana launched a Child Care Tri-Share Grant pilot program (modeled after Michigan's successful program). This splits child care costs three ways: employer, employee, and state. While smaller in scale than the tax credit, it's another tool in your Indiana child care strategy.
💡 Indiana Strategy
Indiana offers a powerful state-level credit that stacks with federal 45F. However, be strategic: the $100k per-taxpayer cap and $2.5M statewide pool mean you should file early and plan for the cap. For larger investments, the federal 45F credit will carry more of the load.
Indiana-Specific Example: The "Manufacturing Hub" Scenario
A manufacturing company in Fort Wayne with 250 employees establishes an on-site child care facility to support its workforce.
| Expense Category | Annual Investment | Federal 45F Credit (50%) | Indiana State Credit |
|---|---|---|---|
| Facility Operating Costs | $300,000 | $150,000 | 50% = $150k (exceeds cap) |
| Staffing & Training | $150,000 | $75,000 | 50% = $75k (exceeds cap) |
| Total | $450,000 | $225,000 | $100,000 (CAPPED) |
Note: While 50% of $450,000 = $225,000, the Indiana credit is capped at $100,000. The federal 45F credit has no such cap (up to $600k), so it carries more of the load for larger investments.
🏭 The Indiana Advantage
By stacking the federal and state credits, the company recoups $325,000 of its $450,000 investment (72%). The federal credit does the heavy lifting ($225k), while Indiana's $100k cap still provides meaningful support. This combination makes employer-supported child care highly attractive for Indiana manufacturers.
Indiana Compliance & Resources
📋 Licensing Requirements
All child care facilities must be licensed by the Indiana Family and Social Services Administration (FSSA). This ensures programs meet state health and safety standards.
IN FSSA Child Care Licensing →💼 Indiana Employer Child Care Expenditure Credit
Administered by the Indiana Department of Revenue, this credit is claimed on the state corporate income tax return. The credit is non-refundable and cannot exceed the taxpayer's state tax liability.
IN Dept. of Revenue Credits →📄 Required Federal Form
File IRS Form 8882 with your federal business tax return to claim the Section 45F credit. Ensure you maintain detailed records of all qualified expenditures.
IRS Form 8882 →🤝 Local Support
Indiana's Child Care Resource and Referral (CCR&R) network can help employers find and partner with high-quality local child care providers.
IN Child Care R&R Network →Indiana Child Care Landscape
$1.1 Billion
Annual economic impact of child care sector disruptions in Indiana.
80,000+
Number of children under 6 with all parents in the workforce.
45%
Percentage of Hoosiers living in a "child care desert" with limited access to licensed care.
🏆 The Toyota Model: Princeton, Indiana
Toyota Motor Manufacturing Indiana (TMMI) in Princeton is a leader in employer-supported child care. They partnered with a local provider to open a 24-hour child care center (the "Early Learning Center") specifically designed to accommodate shift workers. This is the perfect model for Indiana manufacturers with non-traditional schedules—proving that child care can be tailored to your workforce's actual needs.
Major Markets in Indiana
Key economic hubs where employer-supported child care can have the greatest impact include:
- Indianapolis-Carmel-Anderson – Finance, healthcare, tech
- Fort Wayne – Manufacturing, defense
- Evansville – Manufacturing, healthcare
- South Bend-Mishawaka – Education, healthcare, manufacturing
- Lafayette-West Lafayette – Education, pharma, manufacturing
- Princeton – Automotive manufacturing (Toyota)
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.
Frequently Asked Questions (Indiana)
The Indiana Employer Child Care Expenditure Credit is capped at $100,000 per taxpayer per year. Even if 50% of your qualified expenditures exceeds this amount, you cannot claim more than $100,000 in state credits annually.
Yes! Indiana has allocated only $2.5 million TOTAL for all employers statewide per fiscal year. This is a first-come, first-served credit—if 25 large companies claim the max $100k each, the fund is empty. File early!
Qualified expenditures include costs for planning, constructing, renovating, or equipping a child care facility, as well as ongoing operating costs and payments made directly to a licensed child care provider on behalf of an employee.
Yes. The credits are designed to be stacked. You can claim the 50% Indiana credit (up to $100k) and the 40-50% federal 45F credit (up to $600k) for the same qualified expenditures, subject to each credit's specific rules and limitations.
No, the Indiana Employer Child Care Expenditure Credit is non-refundable. It can only be used to offset your Indiana state income tax liability for the tax year. Excess credits can typically be carried forward (check SEA 2 specifics for the exact carryforward period).
The Indiana Family and Social Services Administration (FSSA) provides an online portal called "Carefinder" where you can search for licensed and registered child care providers throughout the state.
Indiana launched a Child Care Tri-Share Grant pilot program (modeled after Michigan). It splits child care costs three ways: employer, employee, and state. While smaller in scale than the tax credit, it's another tool for employers looking to support their workforce.
Calculate Your Potential Indiana Savings
Use our free calculator to estimate your combined federal and state tax savings. See how investing in child care can benefit your bottom line and your employees.
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