The Employer-Provided Child Care Credit (45F)

Despite the vital role child care plays in keeping our economy running, many parents lack accessible and affordable child care options.

The federal tax code provides an incentive for businesses to help their employees access child care through the Employer-Provided Child Care Credit (45F). This credit is designed to offset some of the costs a business would incur by providing child care for their employees.

Increasing take-up rates would better support working parents and strengthen the workforce. For the greatest economic benefit, it is crucial that any changes to 45F addresses the feasibility of use for small businesses, which employ almost half of America’s private sector workforce.

A recent report from the GAO makes several recommendations to improve the credit design and take-up rates. BPC supports all their recommendations in their report, and has additional recommendations on improving credit design. In addition to improving the credit for employers, Congress should also ensure that employer-provided child care does not create undue burdens on families. Changes should be made to overlapping tax credits to de-link them from employer-provided child care benefits.