The Internal Revenue Service (IRS) released Tax Tip 2025-39 this week to highlight the Childcare Tax Credit. This federal employer-provided credit, which can be up to $150,000.00, helps employers who have paid or incurred qualified childcare expenditures during the tax year.
Qualified childcare costs follow:
- Costs associated with acquiring, constructing, rehabilitating, or expanding property used as the taxpayer’s qualified childcare facility. A qualified childcare facility is one that meets the requirements of all laws and regulations of each state or local government in which it is located.
- Operating expenses paid by the business, including amounts paid to support childcare workers through training, scholarship programs, and providing increased compensation to employees with higher levels of childcare training.
- Qualified resource and referral costs which include amounts paid or incurred under a contract with a qualified childcare facility to provide childcare services to employees of the taxpayer.
Employers are required to complete Form 8882, Credit for Employer-Provided Childcare Facilities and Services to claim this credit, which is part of the general business credit subject to the carryback and carryforward rule. This means employers may carryback unused credit one year and then carryforward 20 years after the year of the credit. Taxpayers whose only source for the credit is from pass-through entities will report the credit directly on Form 3800, General Business Credit.
Businesses should refer to the IRS employer-provided childcare credit page on IRS.gov for the most current information on the requirements for qualified childcare expenditures/childcare facilities and for claiming the credit. SPS/GZ is aware that the current form of the Child Tax Credit, as defined by the Tax Cuts and Jobs Act of 2017 (TCJA), is set to expire at the end of 2025, unless Congress passes new legislation. We will provide updated news as new information is received.
SPS/GZis a full-service tax reporting firm that includes 1099 online filing services. Known for personalized service and exceptional support, while utilizing state-of-the-art technology, we create and e-file various 1099s, Forms 1098-T and 1042-S, Affordable Care Act tax forms, and Forms 3921 and 3922 for clients of all sizes. For more information, reach out to us at sales@greenzapato.com or call us at (888)375-3049. Our complete and affordable solution allows administrators to simply upload their tax form data file to our secure portal in a few simple steps and we handle everything else to keep your organization compliant. Contact us today!
