Incentives for Employers

 

Federal tax incentives:

 

Employer's Child Care Assistance Credit - There is a credit available to employers for certain costs of providing child care assistance to employees. Subject to a $150,000-per-tax-year limit, the credit is available for (1) 25 percent of certain costs of acquiring, constructing, rehabilitating, expanding or operating a qualified child care facility, (2) 25 percent of certain costs paid or incurred under a contract with a qualified child care facility and (3) 10 percent of the costs of certain other types of child care assistance.

L-17870-Employer-s-Child-Care-Assistance-Credit..pdf 14.0KB Nov 30, 2010 4:18 PM

 

Employer-provided child care credit – Employers who provide child care for the families of their employees may be eligible for this tax credit. You can calculate this credit by adding together the following costs: (1) 25 percent of the “qualified child care expenditures” and (2) 10 percent of the “qualified child care resource and referral expenditures.”

EXP 45F4 Employer-provided child care credit..pdf 37.3KB Nov 30, 2010 4:18 PM

 

Exclusion for employer-provided dependent care assistance from an employee's gross income - The gross income of an employee does not include amounts paid or incurred by an employer for “dependent care assistance” provided to the employee under a qualified “dependent care assistance program.” In addition, amounts received under dependent care assistance programs by uniformed services personnel are also excluded from gross income.

H-1401 Exclusion for employer-provided dependent care assi….pdf 17.4KB Nov 12, 2010 1:34 PM

 

Business Expenses - Amounts paid by an employer to provide a child care service for employees may be deductible as ordinary business expenses under IRC Section 162 since the services reduce absenteeism and turnover, aid in recruitment and retention of employees, and increase productivity for the employer. Amounts paid by an employer to a welfare benefit fund, such as a Voluntary Employees’ Beneficiary Association (VEBA), may also be deductible.

 

Charitable Contributions - An employer may be entitled to a charitable contribution deduction for donating to a qualifying tax-exempt child care organization. 

 

Mile High United Way’s School Readiness Fund

 

Capital Expenses - Costs incurred for acquiring, constructing, and/or remodeling a building to be used as a child care center can be depreciated over a 39-year period under the Modified Accelerated Cost Recovery System described in IRC Section 168. Costs of equipping the building can be depreciated over varying recovery periods depending on the type of business in which the center is located and the type of equipment. See IRS Publication 946 for specific depreciation instructions.

 

Start Up Expenses - Start-up and investigatory expenses incurred in the development of a new child care center may be amortized over 60 months or more under IRC Section 195. Eligible expenses may include costs for advertising, needs assessments, consultant services, and staff training.

 

Tax Exempt Organizations - An employer-supported child care center may be established as a tax-exempt 501 (c)(3) organization. The organization providing child care services must apply to the IRS for tax-exempt status. The employer’s contributions to the center may be deductible as charitable contributions. However, it is required that the center must also be open to the general public. An employer may also be able to deduct child care benefits provided through a (VEBA) 501 (c)(9).