Employer Child Care Tax Credit Toolkit
A 2026 Guide for Georgia Employers
Prepared for Quality Care for Children (QCC)
A Cobb Community Foundation initiative
Prepared by MMA CPA INC.
Mohamed Aalen, CPA, MBA, EA
160 Clairemont Ave., Suite 200
Decatur, GA 30030
Edition 5 — September 2026
Important Notice
This publication is intended for general educational and planning purposes. It is not legal or tax advice, does not create a client relationship, and should not be used as a filing position without review of the employer's specific facts. The federal employer-provided child care credit was substantially expanded for tax years beginning in 2026. Georgia also enacted a new employer child care credit beginning in 2026. Some of the 2026 provisions have not yet been addressed by Treasury, the Internal Revenue Service, or the Georgia Department of Revenue. Where the law or published guidance does not answer a question, this guide identifies the issue rather than treating an interpretation as settled law. This guide reflects the law and published guidance reviewed through August 29, 2026. The Department of Revenue’s Credit 162 pages and the IRS’s §45F and Form 8882 pages were re checked on September 29, 2026; nothing had changed. Employers should confirm current forms, procedures, rates, thresholds, and administrative guidance with their tax adviser before claiming a credit
01 - Executive Summary
Georgia employers may have access to three separate employer child care tax credits:
1. Federal IRC §45F — Employer-Provided Child Care Credit
2. Georgia Credit 105 — Employer Child Care Expense Credit
3. Georgia Credit 162 — New Per-Child Employer Child Care Credit
The credits operate independently and have different eligibility requirements, limitations, and filing procedures.
| Credit | General benefit | Principal limitation |
|---|---|---|
| Federal §45F | 40% of qualifying child care expenditures; 50% for an eligible small business |
$500,000 annual cap; $600,000 for an eligible small business |
| Georgia Credit 105 | 75% of qualifying child care operating or sponsoring costs, reduced by employee payments | Limited to 50% of Georgia income tax liability; 5-year carryforward |
| Georgia Credit 162 | $500 per qualifying child; $1,000 per child in the employer's first qualifying year | Requires DOR preapproval; $20 million statewide annual pool; no carryforward or carryback |
The federal credit generally offers the largest immediate benefit for a small or midsized employer. The Georgia credits require more attention to the employer's Georgia income tax liability. An employer may generate a substantial Georgia credit but be unable to use the full amount in the current year.
What the program is worth
The combined federal and Georgia credits can return most of what an employer spends, and in some circumstances more than all of it. The federal credit alone is 40% of qualifying spending, or 50% for an eligible small business, and Georgia Credit 105 is 75% of the same cost. Both are limited by the employer’s own tax liability, and neither is refundable, so what an employer actually keeps depends on its own numbers rather than on the percentages. Section 13 works one example through: a 20-person eligible small business that spends $50,000 on contracted places for eight children under six. Its first-year benefit is about $38,983, made up of $30,250 federal (the credit plus the remaining deduction) and $8,733 of Georgia credit, with a further $36,767 of Georgia Credit 105 carried forward to later years. That is roughly 78% of the cost recovered in the first year, leaving a net cost of about $11,000, before the carryforward. An employer with more Georgia liability would absorb more of the Georgia credit in year one. The Georgia part of that example rests on a position that is unsettled; Section 13 states the qualification. That is why the first step in Section 14 is to model the three credits against the employer’s own tax position, and why the toolkit’s Credit Calculator exists.
The practical approach
For most employers, the simplest structure will be to contract with an existing licensed child care provider and pay the provider directly. In most cases the employer does not need to choose a provider. Employees already have child care arrangements, and the practical starting point is to ask them which providers they use. The employer then confirms whether those providers hold the licensing status each credit requires, and contracts with the ones that do.
Before committing to a program, an employer should:
1. Estimate the federal and Georgia tax benefit.
2. Determine whether the employer qualifies for the federal small-business rate.
3. Ask employees which child care providers they already use, and confirm whether those providers qualify.
4. Address the Georgia Credit 162 preapproval requirement, if applicable.
5. Put the arrangement and employee eligibility rules in writing.
6. Maintain documentation throughout the year.
The most important planning point is simple:
Do not determine the value of a child care program from the credit percentage alone. Determine how much credit the employer can actually use.
02 - Federal IRC §45F Credit
What the credit provides
IRC §45F provides an income tax credit for qualifying employer expenditures to provide child care for employees' children.
The credit was substantially expanded for tax years beginning in 2026
For 2026, the credit generally equals:
• 40% of qualifying child care expenditures;
• 50% for an eligible small business; and
• 10% of qualifying child care resource and referral expenditures.
The annual credit is generally capped at:
• $500,000, or
• $600,000 for an eligible small business.
The dollar limitations begin to be adjusted for inflation after 2026.
These figures limit the amount of the credit, not the amount an employer may spend. An employer may spend more than $500,000 on qualifying child care; the credit generated by that spending is what the limitation caps. The 40% or 50% child care component and the 10% resource and referral component share the single annual limitation.
The small-business test
For 2026, an eligible small business generally has average annual gross receipts of $32 million or less, measured over the preceding five tax years.
The test requires more than looking at the employer's own revenue.
Receipts of businesses under common control and certain affiliated service groups may have to be aggregated. A company that appears to be small when viewed by itself may therefore fail the test because of its ownership structure.
A controlled group is also treated as a single taxpayer for purposes of the annual credit limitation. The group does not receive a separate $500,000 or $600,000 limit for every entity.
Planning point
Employers should document the gross-receipts calculation and any aggregation analysis when claiming the 50% rate
03 - Ways an Employer Can Qualify for §45F
An employer does not have to build a child care center.
There are three principal structures.
Contracting for child care seats
The employer contracts with an existing qualifying child care facility and pays the facility directly to reserve or subsidize places for employees' children.
For most small and midsized employers, this will likely be the simplest approach.
Operating a facility
An employer may build or operate its own qualifying child care facility.
Operating costs can qualify for the credit. Construction and acquisition costs receive separate tax-basis treatment rather than generating an immediate credit for the entire cost.
Paying through an intermediary
For amounts paid or incurred after December 31, 2025, payments through an intermediary may qualify when the intermediary contracts with one or more qualifying child care facilities.
Two limitations are important:
1. The arrangement must ultimately involve a facility that qualifies under §45F.
2. Amounts paid above fair market value for the care are not qualifying expenditures.
The intermediary's fee should therefore be separately identified and documented.
Jointly owned or operated facilities
The 2026 law provides that a facility does not fail to qualify merely because it is jointly owned or operated.
The statute does not, however, explain how the credit should be divided among businesses participating in a jointly owned facility.
The most workable interpretation is that each employer claims the amount it actually paid. That is an inference from the statute, not a published IRS position
04 - Federal Deduction and Credit Interaction
An employer that claims the §45F credit generally must reduce its business deduction for the same expenditure by the amount of the credit.
For example:
Qualifying child care expenditure: $50,000
§45F credit at 50%: $25,000
Remaining deduction: $25,000
At a 21% federal corporate tax rate, the remaining deduction produces approximately:
$25,000 × 21% = $5,250
The simplified federal benefit is therefore:
$25,000 credit + $5,250 tax benefit from the remaining deduction = $30,250
The credit should not be treated as though the employer receives a 50% reimbursement while also retaining a deduction for the full $50,000 expenditure.
Where an employer builds or acquires a facility, the applicable adjustment generally affects the property's tax basis instead
05 - Using the Federal Credit
The §45F credit is nonrefundable.
It is part of the general business credit and generally may be carried back one year and forward twenty years, subject to the applicable general business credit rules and limitations. A business in its first year may have no prior year available for a carryback.
The general business credit also has an annual limitation that can defer the use of a credit even when the business is profitable. The credit therefore should be modeled against the employer's actual tax position rather than viewed solely as a percentage of spending.
Form 8882
Form 8882 is the federal form associated with the employer-provided child care credit. As of the date of this guide, the IRS's posted Form 8882 remained the December 2017 revision and continued to reflect the older 25% credit and $150,000 limitation.
The IRS is expected to update the form for the 2026 law.
The current form and instructions should be confirmed before a 2026 return is filed
06 - Georgia Employer Child Care Credits
Georgia has two long-standing employer child care credits under O.C.G.A. §48-7-40.6 and added a third
credit under O.C.G.A. §48-7-29.28.
The credits should be analyzed separately.
Credit 105 — Providing or Sponsoring Child Care
Credit 105 generally equals 75% of the employer's qualifying cost of operating or sponsoring child care, reduced by amounts paid by employees.
The credit is limited to 50% of Georgia income tax liability for the year, computed without regard to any other credits. Credit 104 has a separate ceiling measured the same way. The two ceilings are separate rather than shared, so the two credits can together reach up to 100% of Georgia liability. This is a ceiling computation only; it does not mean a credit can absorb 50% of the tax remaining after other credits have been applied.
Unused amounts generally carry forward for five years.
Qualifying operating costs
“Cost of operation” generally means reasonable direct operating costs.
Georgia’s regulation limits Credit 105 to care for a child under the age of 13 who is a dependent of an employee and for whom the employee can claim an exemption for Georgia income tax purposes. The statute itself contains no age limit; the limit is supplied by regulation. Both conditions must be met, so a child under 13 whom the employee cannot claim on a Georgia return does not count. The statute excludes qualifying child care property from the operating-cost base. A dollar of property cost therefore should not be counted again as an operating expense for Credit 105.
Credit 105 is claimed on Georgia Form IT-CCC75
07 - Georgia Credit 104 — Child Care Property
Credit 104 applies to qualifying child care property.
The credit generally equals 100% of the cost of qualified child care property, but it is claimed at 10% per year over ten years.
Qualifying property may include:
• Land;
• Buildings;
• Improvements;
• Furniture;
• Fixtures; and
• Equipment.
The property must be used exclusively for the qualifying child care facility.
The facility must satisfy the applicable Georgia licensing requirements, and at least 95% of the children using the facility must be children of the employer’s employees. Children of another employer’s employees also count toward the 95% test, but only where the property is owned jointly or severally by the employer and that other employer, or where the other entity is a member of the employer’s affiliated group within the meaning of IRC §1504(a). Attendance should be reasonably representative of each employer’s capital contribution to the facility. A shared facility therefore works on a co-ownership footing; simply buying places at another employer’s center does not satisfy this test.
Credit 104 has its own 50% limitation based on Georgia income tax liability and generally carries forward for three years. The Credit 104 carryforward runs from the close of the year the credit is claimed, and because the credit is claimed in ten annual installments, each installment starts its own three-year period. The Credit 105 carryforward runs instead from the close of the year the cost of operation was incurred.
The Credit 104 limitation is separate from the Credit 105 limitation.
Georgia also requires an income adjustment for depreciation attributable to property that generated the credit.
Employers should be aware of a 14-year Georgia recapture period if the property ceases to satisfy the applicable requirements.
Credit 104 is claimed on Georgia Form IT-CCC100
08 - Georgia Credit 162 — The New 2026 Per-Child Credit
Credit 162 was enacted for taxable years beginning on or after January 1, 2026.
It provides:
• $500 per qualifying child, or
• $1,000 per qualifying child in the employer's first qualifying year.
The credit applies to qualifying children under age six enrolled at an eligible child care facility.
Credit 162 is enacted, but implementation remains incomplete
This distinction is important.
The credit is law. However, as of September 29, 2026, the Georgia Department of Revenue had not issued the implementing regulation required by the statute and had not published an opening date for the required preapproval process. Accordingly, Credit 162 should be treated as a potential 2026 credit subject to implementation and preapproval, rather than as a routine credit that employers can claim as a matter of course.
Preapproval
Credit 162 requires preapproval from the Georgia Department of Revenue. The statute requires application "in the manner specified by the department." The Department’s Credit 162 page states that the preapproval application is submitted electronically through the Georgia Tax Center. As of September 29, 2026 the Department had not published an opening date, a form, or the implementing regulation. Confirm the form and the opening date with the Department before relying on any particular timing.
The statute provides for:
• A $20 million statewide annual pool;
• Action by the Department within 30 days;
• Approval generally in the order applications are received; and
• Proration of applications received on the same day when the remaining pool is insufficient.
The credit is limited to 100% of Georgia income tax liability.
There is no carryforward and no carryback.
The provision is scheduled to be repealed after December 31, 2030.
Practical Rule:
Do not budget for or claim Credit 162 until the required preapproval has been obtained and the applicable Georgia administrative procedures have been confirmed.
09 - Credit 162 Payment Requirements
The statute requires qualifying payments to:
• Be made directly to the child care facility;
• Be made in the name of and for the benefit of an employee whose child is enrolled at the facility;
• Total at least $1,000 per taxable year for the employee; and
• Be provided in addition to, and not in lieu of, the employee's other compensation and benefits.
The $1,000 requirement is measured per employee, while the credit is calculated per qualifying child.
For example, an employee with two qualifying children could potentially generate two per-child credits while satisfying one $1,000-per-employee payment threshold.
Payment method
The statute does not expressly state that reimbursement or payroll delivery is prohibited.
The direct-payment approach is a conservative reading of the statutory requirement that payment be made directly to the facility in the name of and for the benefit of the employee. Until Georgia provides further guidance, direct payment to the child care facility is the preferred approach.
10 - Eligible Facilities for Credit 162
The qualifying child must be enrolled at a:
• Child care learning center, or
• Family child care learning home
that is permitted, licensed, or commissioned by the Georgia Department of Early Care and Learning (DECAL).
Family child care learning homes qualify.
A Quality Rated designation is not required.
The employer should independently verify the provider's status and retain evidence of that verification approach.
11 - The First-Year Credit 162 Rate
The $1,000-per-child rate applies only if:
1. The year is the employer's first year making qualifying payments; and
2. The employer did not make qualifying payments, reimbursements, or other subsidies for employee child care in an earlier year.
An employer with an existing child care subsidy or on-site child care program does not become a “first-year” employer simply by changing the form of its program.
12 - Federal and Georgia Credits Together
The federal and Georgia credits apply against different taxes.
An employer may therefore potentially claim the federal §45F credit and one or more Georgia credits for the same overall child care program The more difficult issue is the relationship between Georgia Credit 105 and Credit 162. Neither statute expressly states whether the same expenditure can support both credits, and neither provides a clear ordering rule for this situation.
As of September 29, 2026, Georgia had not issued the regulation required to implement Credit 162.
Important planning caution
The assumption that the same dollar of child care spending may generate both Credit 105 and Credit 162 is not settled Georgia law.
An employer should obtain and document a tax position before relying on both credits for the same expenditure.
13 - Illustrative Example
The following example is based on assumed facts and is intended only to illustrate the mechanics of the credits.
It is not a filing position or advice for any particular employer.
Assume a Georgia C corporation:
• Has 20 employees;
• Has $2,000,000 of revenue;
• Has $1,800,000 of operating expenses;
• Contracts with a licensed local child care center;
• Spends $50,000 during the year;
• Pays the provider directly;
• Provides care for eight employees' children;
• All eight children are under age six;
• Has not previously subsidized employee child care; and
• Qualifies as an eligible small business for federal §45F purposes; and
• Has enough federal income tax liability to absorb the credit in the current year.
Federal Credit
| Item | Calculation | Amount |
|---|---|---|
| Child care spending | $50,000 | |
| Federal credit | 50% × $50,000 | $25,000 |
| Remaining deduction | $50,000 – $25,000 | $25,000 |
| Tax benefit from deduction | $25,000 × 21% | $5,250 |
| Total federal benefit | $30,250 |
Georgia credits
The example assumes the employer can use the whole federal credit this year. That assumption should be tested rather than presumed. Federal taxable income here is approximately $175,000, producing federal tax of roughly $36,750 at 21%. The general business credit limitation under IRC §38(c) permits the credit up to net income tax reduced by the greater of tentative minimum tax or 25% of net regular tax above $25,000, which on these figures is approximately $33,800. The $25,000 credit is below that ceiling and is therefore fully usable. An employer with materially less federal liability would carry part of the credit back or forward instead.
Assume that, after the federal deduction adjustment, Georgia taxable income is approximately $175,000.
At the 2026 Georgia income tax rate of 4.99%:
$175,000 × 4.99% ≈ $8,733
Credit 105:
75% × $50,000 = $37,500
But Credit 105 is limited to 50% of Georgia tax liability computed without regard to any other credits:
50% × $8,733 ≈ $4,367
Credit 162, assuming required approval and all statutory requirements are satisfied:
8 children × $1,000 = $8,000
Applying the Georgia limitations
The employer has generated approximately $12,367 of Georgia credits but has only approximately
$8,733 of Georgia tax liability.
Credit 162 has no carryforward. Credit 105 generally carries forward five years.
The example therefore assumes that the employer uses:
• $8,000 of Credit 162, and
• $733 of Credit 105
against current-year Georgia liability.
Approximately $36,767 of Credit 105 would remain available for future years.
| Result | Amount |
|---|---|
| Federal benefit | $30,250 |
| Georgia credits used currently | $8,733 |
| Total first-year benefit | $38,983 |
| Approximate first-year net cost | $11,017 |
| Credit 105 carried forward | $36,767 |
Critical qualification
The Georgia portion of this example assumes that the same $50,000 expenditure can support both Credit 105 and Credit 162.
That treatment is unsettled.
If Georgia ultimately requires the credits to be based on separate expenditures, the Georgia benefit would be lower. The federal calculation would not change.
14 - Implementing a Child Care Program
For most employers, implementation can be straightforward.
Step 1 — Estimate the tax benefit
Before committing funds, calculate:
• Federal taxable income;
• Georgia taxable income;
• Federal §45F eligibility;
• Small-business status;
• Expected child care expenditures;
• Georgia income tax liability;
• Potential Credit 105; and
• Potential Credit 162.
The companion Credit Calculator can be used as a planning tool.
Step 2 — Ask employees which providers they use, and confirm those providers qualify
Start with the employees. Ask which child care providers they currently use, which providers they intend to use, and how many children are involved. Most employers do not want to choose a provider for an employee, and they do not have to. Then confirm the licensing status of each provider employees have named, and ask each one whether it will contract with an employer for reserved or subsidized places. For Credit 162, confirm the provider is a child care learning center or family child care learning home that is permitted, licensed, or commissioned by DECAL. A provider that is license-exempt rather than licensed does not qualify, even though it operates lawfully. Employers should expect this list to change as employees join, leave, or change providers. The program is easier to run if the provider list is maintained as a schedule that can be updated during the year rather than fixed at the outset.
Step 3 — Select the structure
For most small and midsized employers, contracting for seats will be easier than operating a facility. Where employees name a large number of providers, the administrative burden of contracting with and paying each one separately may be more than the employer wants to carry. That is the point at which an employer should consider engaging an intermediary or benefits administrator. Note the federal and Georgia divergence before doing so: federal law permits qualifying intermediary arrangements for amounts paid after December 31, 2025, while Georgia’s regulation requires payment directly to the entity providing the care. Quality Care for Children offers to administer the program for employers: verifying each provider’s DECAL status, collecting the providers’ periodic reports and invoices, maintaining the per-facility file, and telling the employer what is payable to each facility each period. That removes most of the administrative burden without touching the tax analysis, because the employer’s own payment still goes directly to the facility. QCC can also handle the payment process itself. Federal law allows that for amounts paid after December 31, 2025. The Georgia credits require payment directly to the facility, and no Georgia authority addresses a payment made through an administrator or paying agent, so an employer that intends to claim the Georgia credits should keep its own payment direct and let QCC do the rest, or confirm a paying-agent structure with its tax adviser before adopting it. Terms for QCC’s service are available from QCC. Using more providers does not raise the federal ceiling. Each arrangement is tested on its own for whether it qualifies, but the annual §45F limitation is a single limitation per employer across every facility
Step 4 — Address Credit 162 preapproval
If the employer intends to pursue Credit 162, monitor the Georgia Department of Revenue's application process and obtain the required approval before claiming the credit.
Step 5 — Put the arrangement in writing
The provider agreement should describe:
• The care being provided;
• The seats funded;
• The cost;
• Payment terms; and
• The applicable period.
The employer should also maintain a written employee eligibility policy.
The toolkit provides one agreement for this purpose, the Child Care Services Agreement, a tri-party document. The employer and the provider sign it once. Each employee joins it by signing the employer’s Employee Enrollment and Eligibility Form, whose Section F is the joinder, so an employee signs one document and the agreement never needs re-executing. The same agreement serves both an employeechosen provider and places the employer has reserved at a provider of its own choosing. The federal credit contains requirements relating to employee access and highly compensated employees. A program should be designed broadly rather than as an executive benefit.
Step 6 — Pay the provider directly
Direct payment provides the clearest record of the employer's expenditure and is particularly important for
Credit 162.
Step 7 — Confirm the provider's rate
Amounts above the provider's standard rate for comparable care are not qualifying federal expenditures.
Ask the provider to confirm the applicable standard rate in writing.
Step 8 — Record payments throughout the year
Maintain an expenditure tracker and retain invoices and proof of payment. The record needs, for each payment, the date, the payee, the category of spending, the employee and child served, the invoice, and the amount. If the employer’s accounting or payroll system already captures those elements, that record serves; the Expenditure Tracker in the toolkit workbook is for employers without one. The same applies to the other templates: where a payroll or child care management system already produces a record with the required elements, the template is optional.
Step 9 — Obtain provider reporting
The provider should supply information necessary to establish:
• Licensing status;
• Children served;
• Ages of the children;
• Amounts paid by employees; and
• Other information needed to calculate the credits.
Step 10 — Prepare for filing
Confirm the applicable federal and Georgia forms before filing.
Track all carryforwards and, where property is involved, applicable recapture periods.
15 - Eligible and Ineligible Expenditures
| Expenditure | Federal §45F | Georgia 105 | Georgia 162 |
|---|---|---|---|
| Contracting for seats at a licensed center and paying the center | Yes | Yes | Yes, if statutory requirements are satisfied |
| Operating an employer's own qualifying center | Yes | Yes | Generally no |
| Building or equipping a center | Separate federal treatment; basis adjustment applies | Credit 104 may apply | No |
| Payment through a benefits platform/intermediary | Potentially, for qualifying arrangements | Georgia's regulation requires the cost to be paid by the employer directly to the entity providing the care (Reg. 560-7-8-.38(1)(f)). Georgia has not conformed to the 2026 federal intermediary rule. Whether an intermediary breaks the direct-payment requirement is unresolved; treat as adverse until Georgia says otherwise | Uncertain |
| Child care resource and referral services | Yes, at 10% | No | No |
| Reimbursing an employee | No | No | No clear statutory authorization; direct payment preferred |
| Adding cash to a paycheck | No | No | No clear statutory authorization; direct payment preferred |
| Employee-funded dependent care FSA | No employer credit | No | No |
| Amounts above provider's standard rate | No | No | No |
| Care for a school-age child | Yes | Only for a child under 13 who is a dependent the employee can claim for Georgia purposes (Reg. 560-7-8-.38(1)(a)) | No; child must be under six |
Where the statute or published guidance does not clearly address an arrangement, the employer should obtain advice before relying on the treatment.
16 - Dependent Care Assistance Plans
An employer may potentially operate a dependent care assistance program under §129 alongside a §45F child care program. For 2026, employees may generally exclude up to $7,500 of qualifying dependent care assistance under the amended §129 rules.
An employee-funded dependent care FSA does not itself create an employer child care credit because the funds are the employee's. Nothing in §45F or §129 generally disqualifies an employer from maintaining both arrangements.
The same expenditure should not be counted twice.
Whether one dollar can simultaneously be treated as employee-funded §129 assistance and an employer §45F expenditure is not addressed by published authority. The conservative position is that amounts coming from the employee's own compensation are not the employer's expenditure
17 - Documentation
The employer—not the provider—has primary responsibility for assembling and retaining the documentation supporting the credits. The provider supplies information; the employer should maintain the complete file.
Documentation applicable to all three credits
• Written provider contract;
• Proof of provider licensing or other required authorization;
• Invoices;
• Proof of direct payment;
• Written employee eligibility policy.
Federal §45F documentation
• Fair-market-value support;
• Records connecting expenditures to employees and their children;
• Small-business gross-receipts calculation;
• Controlled-group and aggregation analysis, where applicable;
• Evidence of the deduction or basis adjustment.
Georgia documentation
• Schedule of employee payments;
• Georgia income tax liability calculation;
• Credit limitation calculations;
• Carryforward schedules;
• Credit 104 property records, where applicable.
Credit 162 documentation
• Preapproval application;
• Approval from the Georgia Department of Revenue;
• Proof of direct payment to the facility;
• Evidence that payment was made in the employee's name and for the employee's benefit;
• Schedule showing at least $1,000 of qualifying payments per employee;
• Verification that each child was under age six;
• Provider eligibility documentation.
Georgia’s own record requirements are specific rather than general. Reg. 560-7-8-.38(2)(d) requires the employer to keep records certifying the cost of operation, and lists what they must contain: the names and social security numbers of the employees who use the facility, the names and ages of their children and the children’s social security numbers where the child is at least one, and the provider’s name and federal identification number. Reg. 560-7-8-.38(3)(f) imposes a parallel requirement for qualified child.
care property. Form IT-CCC75 must be attached to the Georgia return for Credit 105 under (2)(e), and Form IT-CCC100 with a supporting schedule for Credit 104 under (3)(d). These are conditions of the credit, not filing housekeeping. The best time to assemble this documentation is when the transaction occurs—not eleven months later.
18 - Common Errors
1. Paying the employee instead of the provider
Direct payment to the provider provides the clearest support for the employer's expenditure and is particularly important for Credit 162.
2. Claiming Credit 162 without preapproval
The credit requires Department of Revenue preapproval.
3. Taking the full federal deduction
The federal deduction generally must be reduced by the §45F credit.
4. Treating Georgia credits as cash refunds
Georgia credits reduce Georgia income tax liability. They do not automatically generate cash.
5. Ignoring carryforward rules
Credit 105 can generally be carried forward five years. Credit 162 cannot.
6. Limiting the program to executives
The federal credit contains employee-access and nondiscrimination requirements.
7. Paying above the provider's standard rate
Amounts above fair market value are not qualifying federal expenditures.
8. Waiting until year-end to document the program
Contemporaneous documentation is substantially easier to defend and verify
19 - Frequently Asked Questions
Does an employer have to build a child care facility?
No. For many employers, contracting with an existing licensed provider will be the simplest structure.
How much can an employer save?
The result depends on the employer's tax position. For an eligible small business, the federal credit alone can equal 50% of qualifying expenditures, subject to the applicable limitations. Georgia benefits depend heavily on Georgia tax liability and, for Credit 162, successful preapproval.
Can an employer simply give employees money for child care?
That is not the preferred structure. The federal credit is based on qualifying employer expenditures, and Credit 162 specifically requires
payment directly to the facility in the name of and for the benefit of the employee. Direct payment to the provider is the conservative approach.
Does a dependent care FSA prevent the employer from claiming §45F?
No. The arrangements may potentially coexist, provided the same expenditures are not counted twice.
Must the provider be licensed?
Yes. The precise licensing requirement depends on the credit. For Credit 162, the facility must meet the statutory DECAL requirements.
What if the employer has little Georgia tax liability?
The employer may not be able to use all of the Georgia credit in the current year. Credit 105 generally carries forward five years. Credit 162 does not.
Can the federal and Georgia credits be claimed for the same program?
Potentially. The federal and Georgia credits apply against different taxes. The interaction between Georgia Credit 105 and Credit 162 remains unsettled when the same expenditures are involved.
What does Credit 162 preapproval involve?
The application is filed with the Georgia Department of Revenue through the Georgia Tax Center. The statute provides for a $20 million statewide annual pool, a 30-day action period, and approval generally in order of submission. As of September 29, 2026, the Department had not published an opening date or issued the implementing regulation.
Can an outside company administer the arrangement?
Federal law permits certain intermediary arrangements for amounts paid or incurred after December 31, 2025. Georgia has not provided comparable guidance for all intermediary arrangements, and its regulation requires payment directly to the entity providing the care. Quality Care for Children offers to administer the program for employers. An employer that intends to claim the Georgia credits should keep its own payment direct to each facility and let QCC handle verification, reporting, and the file, unless its tax adviser has confirmed a paying-agent structure. See Section 14, Step 3.
Does the program have to benefit every employee?
The federal rules require employee access and prohibit arrangements that favor highly compensated employees. Identical dollar benefits are not necessarily required, but the program should not be structured as an executive-only benefit.
What if the child is seven?
Federal §45F can apply; it has no age limit. Georgia Credit 105 can apply only while the child is under 13 and is a dependent the employee can claim for Georgia purposes. Credit 162 is limited to children under age six.
What happens if the employer ends the program?
For contracted child care seats, the employer generally stops incurring qualifying expenditures. Separate federal and Georgia recapture rules can apply to property and construction arrangements.
Can an S corporation or partnership claim these credits?
The answer depends on the credit. The older Georgia credits have rules governing pass-through treatment. Credit 162 does not yet contain comparable guidance explaining how the credit passes through an S corporation or partnership. The statute is silent and the Department has issued no guidance, so the mechanics are unresolved. Silence is not a prohibition, but no position should be taken on a return without a ruling or further guidance. The issue should be addressed with the employer’s tax adviser before relying on Credit 162.
What if the business is not profitable?
The federal credit is nonrefundable but generally benefits from the general business credit carryback and carryforward rules. Georgia Credit 105 generally carries forward five years. Credit 162 has no carryforward or carryback.
Is there a deadline?
The credits are generally claimed for the year in which the qualifying expenditures are incurred. For Credit 162, the most important practical deadline is the preapproval process. The statutory repeal date for Credit 162 is December 31, 2030.
20 - 2026 Planning Checklist
Before implementing an employer child care program, management should be able to answer the following questions:
• What is the expected annual child care expenditure?
• Is the employer eligible for the federal 50% small-business rate?
• Have related entities been included in the gross-receipts analysis?
• What is the employer's expected federal tax liability?
• What is the employer's expected Georgia tax liability?
• Which Georgia credits may apply?
• Will the employer pursue Credit 162?
• Has Credit 162 preapproval been obtained?
• Have employees been asked which child care providers they use, and has that information been
gathered in writing?
• Is each provider employees have named properly licensed, permitted, or commissioned, and has
that been verified and documented?
• For any provider that is license-exempt rather than licensed, has the employer confirmed the
consequence for each credit?
• Given the number of providers employees have named, can the employer administer direct
contracting and payment itself, or should it engage an intermediary or benefits administrator?
• If an intermediary is used, has the Georgia direct-payment requirement been considered separately
from the federal rule?
• Is there a process for an employee to ask that a new provider be added during the year?
• Will the employer pay the provider directly?
• Is the program available broadly enough to satisfy federal requirements?
• Does the provider's price reflect its standard rate?
• Is the written provider agreement complete?
• Are invoices and proof of payment being retained?
• Are employee payments being tracked?
• Are children's ages and enrollment being documented where required?
• Are Georgia credit carryforwards being tracked?
• Has the employer confirmed the current IRS and Georgia forms before filing?
21 - Sources and Authority
The following authorities support the substantive provisions discussed in this guide.
Federal — IRC §45F and Related Provisions
| Statement | Authority |
|---|---|
| 40% of qualifying child care expenditures; 50% for an eligible small business; 10% of resource and referral expenditures | IRC §45F(a), as amended by P.L. 119-21 |
| $500,000 / $600,000 annual limitation, indexed after 2026 | IRC §45F(b)(1), (b)(2) |
| Controlled group shares a single annual limitation | IRC §45F(e)(1); IRC §52(a), (b) |
| Eligible small business uses a five-taxable-year gross-receipts test | IRC §45F(c)(4), incorporating IRC §448 |
| $32 million threshold for 2026 | Rev. Proc. 2025-32; IRC §448(c)(4) |
| Related entities and affiliated service groups may be aggregated | IRC §448(c)(2); IRC §§52(a), (b); §414(m), (o) |
| Certain intermediary payments qualify after December 31, 2025 | IRC §45F(c)(1)(A)(iii); effective-date provisions of P.L. 119-21 |
| Intermediary must contract with qualifying facilities | IRC §45F(c)(1)(A)(ii) |
| Amounts above fair market value are excluded | IRC §45F(c)(1)(B) |
| Joint ownership or operation does not itself disqualify a facility | IRC §45F(c)(2)(C) |
| Division of credit among joint owners | Not addressed by statute or published guidance |
| Deduction reduced by amount of credit | IRC §45F(f)(2) |
| Basis adjustment for acquisition and construction costs | IRC §45F(f)(1)(A), (B) |
| Employee enrollment and nondiscrimination requirements | IRC §45F(c)(2)(B); IRC §414(q) |
| Federal recapture rules | IRC §45F(d) |
| General business credit treatment | IRC §38(b)(15); IRC §39 |
| General business credit annual limitation | IRC §38(c) |
| Dependent care assistance exclusion | IRC §129(a)(2)(A), as amended by P.L. 119-21 |
Georgia — Credits 104, 105 and 162
| Statement | Authority |
|---|---|
| Credit 105 equals 75% of qualifying operating cost less employee payments | O.C.G.A. §48-7-40.6(b) |
| Operating cost excludes qualifying child care property | O.C.G.A. §48-7-40.6(a)(1) |
| Credit 105 limited to 50% of Georgia liability; five-year carryforward | O.C.G.A. §48-7-40.6(c)(1), (c)(2) |
| Credit 104 equals 100% of qualifying property cost, claimed at 10% per year | O.C.G.A. §48-7-40.6(d) |
| Qualified property includes land, buildings, improvements, furniture, fixtures and equipment | O.C.G.A. §48-7-40.6(a)(6) |
| Facility requirements for Credit 104 | O.C.G.A. §48-7-40.6(a)(6)(A), (B) |
| Credit 104 has a separate 50% limitation and three-year carryforward | O.C.G.A. §48-7-40.6(e); Ga. Comp. R. & Regs. r. 560-7-8-.38 |
| Credit 104 and 105 limitations are separate | Ga. Comp. R. & Regs. r. 560-7-8-.38 |
| Georgia depreciation add-back for Credit 104 property | Ga. Comp. R. & Regs. r. 560-7-8-.38 |
| Georgia property-credit recapture | O.C.G.A. §48-7-40.6(a)(9), (f) |
| Existing §48-7-40.6 credits pass through to owners under specified rules | Ga. Comp. R. & Regs. r. 560-7-8-.38 |
| Credit 162 equals $500 per child; $1,000 in first qualifying year | O.C.G.A. §48-7-29.28(b)(1), (b)(2) |
| First-year test | O.C.G.A. §48-7-29.28(b)(2) |
| Direct payment and employee-benefit requirements | O.C.G.A. §48-7-29.28(a)(2) |
| At least $1,000 per taxable year per employee | O.C.G.A. §48-7-29.28(a)(2)(B) |
| Payment must be additional to compensation and benefits | O.C.G.A. §48-7-29.28(a)(2)(C) |
| Eligible facility | O.C.G.A. §48-7-29.28(a)(1) |
| Quality Rated status not required | O.C.G.A. §48-7-29.28 |
| $20 million statewide annual pool | O.C.G.A. §48-7-29.28(c) |
| Preapproval procedure | O.C.G.A. §48-7-29.28(e) |
| 100% Georgia liability limitation; no carryforward or carryback | O.C.G.A. §48-7-29.28(d) |
| Repeal after December 31, 2030 | O.C.G.A. §48-7-29.28(g) |
| Commissioner directed to promulgate rules | O.C.G.A. §48-7-29.28(f) |
22 - Sources and Authority
Several issues remain unresolved as of September 29, 2026.
Federal §45F
Treasury and the IRS had not issued comprehensive guidance addressing all of the 2026 changes.
Open questions include:
• How certain intermediary arrangements should be distinguished from resource and referral services;
• How credit should be divided among owners of jointly owned facilities;
• What substantiation will be required;
• How state and local cost-sharing dollars should be treated; and
• How certain backup and drop-in care arrangements should be treated.
Georgia Credit 162
Georgia had not issued the implementing regulation required by O.C.G.A. §48-7-29.28.
Open questions include:
• The timing and operation of the preapproval process;
• The interaction between Credit 162 and Credit 105;
• Treatment of the same expenditure under both credits;
• Pass-through treatment for S corporations and partnerships; and
• Additional administrative and documentation requirements.
These issues can materially affect the value of a proposed program.
Employers should therefore distinguish between:
Credit generated under the statutory formula and Credit actually available for use on the employer's tax return.
23 - Official Resources
Employers should confirm current information with the applicable agencies before filing.
Internal Revenue Service
Employer-provided child care credit
IRS Form 8882
https://www.irs.gov/forms-pubs/about-form-8882
Georgia Department of Revenue
Tax credits
https://dor.georgia.gov/taxes/tax-credits
Georgia Department of Revenue — Employer Child Care Expense Credit
https://dor.georgia.gov/georgia-employer-childcare-expense-credit
Georgia Tax Center
Georgia Department of Early Care and Learning
Quality Care for Children
24 - Conclusion
The 2026 changes create a significant opportunity for Georgia employers that want to help employees with child care. For many employers, the most practical approach will be to ask employees which providers they already use, confirm that those providers qualify, contract with them, pay them directly, make the program broadly available, and maintain clear records.
The expanded federal §45F credit can provide a substantial benefit, particularly for eligible small businesses. Georgia Credits 104 and 105 provide additional opportunities under established state provisions. Credit 162 could provide another meaningful benefit for employers with employees who have children under age six. Its value, however, should not be assumed until the Georgia Department of Revenue's preapproval and implementation procedures are in place.
The best planning process is therefore:
Model the tax benefit.
Ask employees which providers they use.
Confirm that each provider named qualifies.
Structure the payments correctly.
Obtain required approvals.
Document the program contemporaneously.
Confirm the filing requirements before claiming the credit.
The tax benefit should be considered part of the overall economics of the program—not the sole reason for establishing it.
Disclaimer
This publication is general educational material. It is not legal or tax advice, does not create a client relationship, and should not be used as a filing position without review of the taxpayer's specific facts. It reflects the law and published guidance reviewed through August 29, 2026, with the Department of Revenue and IRS pages re-checked on September 29, 2026, including the federal amendments enacted by P.L. 119-21, Georgia H.B. 136, and Georgia H.B. 463 (2026). Tax laws, regulations, forms, administrative procedures, and agency guidance may change. Rates, thresholds, preapproval procedures, documentation requirements, and the treatment of particular arrangements should be confirmed against current IRS and Georgia Department of Revenue materials before a credit is claimed