Employer Tax Credit Toolkit

Toolkit guide
Employer Child Care Tax Credit Toolkit
Quality Care for Children

Which Child Care Tax Credits Could Benefit Your Business?

Not sure which option to select? Review the descriptions below or consult your tax advisor.

Federal §45F Only

Child care for employees' children

Qualifies for 40% of qualified child care expenditures (50% for eligible small businesses). No age limit for children.

Federal §45F + Georgia Credit 105

Children under 13

Federal credit plus 75% of the cost of operating employer-provided child care. Child must be employee's Georgia dependent under 13.

Federal §45F + Georgia Credit 162

Children under 6 | Requires Preapproval

$500 per child ($1,000 in first year). Child under six. Requires preapproval from Georgia Department of Revenue.

Federal §45F + Both Georgia Credits

Children under 6 | Credit 162 Requires Preapproval

Combine all credits. Each has its own conditions. Credit 162 requires preapproval and applies only to children under six.

Your Child Care Tax Credit Pathway

Follow these seven steps to establish your child care benefit program

Your Selected Tax Credits: — Change Selection
1

Calculate Your Potential Tax Benefits

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Use the calculator to estimate the potential tax benefits available to your business before establishing your child care benefit program.

2

Establish Your Child Care Benefit Policy

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Establish your company's child care benefit policy before enrolling employees. The policy should outline eligibility, benefits, and how payments will be administered.

Open Employer Child Care Benefit Policy
3

Identify Your Employees' Child Care Providers

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Ask participating employees to identify the child care providers they currently use so your company can begin the sponsorship process.

Open Request to Sponsor My Child Care Provider
4

Complete Employee Enrollment Forms

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Each participating employee completes and signs an enrollment form, which the employer reviews and countersigns.

Open Employee Enrollment and Eligibility Form
5

Verify Child Care Provider Licensing

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Each participating provider completes an intake form. Verify applicable licensing or credentials and maintain supporting documentation.

Open Provider Intake and Licensing Verification
6

Complete Your Child Care Services Agreement

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Establish a written agreement with each participating child care provider outlining the services, payment arrangements, and responsibilities.

Open Child Care Services Agreement
7

Complete Your Nondiscrimination Attestation

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Review and document your child care benefit program's nondiscrimination practices before making the first payment.

Open Nondiscrimination Attestation
Keep Your Child Care Benefit Program On Track

Maintain compliance, keep accurate records, and prepare for tax filing

Monthly Responsibilities

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Track payments and collect provider invoices and receipts.

Quarterly Responsibilities

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Review documentation, reconcile payments, and complete the Employer Documentation Checklist.

Annual Responsibilities

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Renew provider verification, update employee enrollment information, complete the annual attestation, and update the calculator.

Year-End Tax Filing

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Access key tax forms and filing instructions for the federal and Georgia credits, and review important considerations with your tax advisor.

When Something Changes

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Update your records when employees, child care providers, or eligibility circumstances change.

Watch For These Key Points

  • ✓ Reduce your federal deduction by the amount of the federal credit.
  • ✓ One federal credit cap per employer, however many facilities you use.
  • ✓ Georgia Credit 105 applies only to a child under 13 who is the employee's Georgia dependent, and payments must be made by you directly to the child care provider.
  • ✓ Georgia Credit 162: child under six, at least $1,000 per employee per year, requires preapproval from the Department of Revenue.
  • ✓ Keep your records for at least four years after the return due date, and longer if under examination.

Need Support?

Quality Care for Children offers business support expertise and resources to help employers navigate child care benefit programs and explore available administrative support options.

Contact QCC to Explore Support Options

Employer Child Care Credit Calculator

Federal §45F · Georgia Credits 105, 104 and 162 · Tax year 2026. A planning tool, not a filing calculation.

Calculating for:
Step 1

Your business

The return type and the income figures set every limit below.
Determines the suggested federal rate and where the Georgia liability is measured. A C corporation and an electing pass-through have their own Georgia liability; otherwise the credits and the 50% ceilings fall to the owners' returns and the Georgia figures here are a proxy.
Relevant only to an 1120-S or 1065. With the election the entity has Georgia liability at 4.99% and the 50% ceilings are measured at that level. Without it, the credits and the ceilings fall to the owners (Reg. 560-7-8-.38(4); Reg. 560-7-3-.03(7)).
Yes if the §448(c) gross receipts test is met: average annual gross receipts of $32,000,000 or less over the five preceding tax years for 2026 (Rev. Proc. 2025-32; §45F(c)(4) substitutes a five-year look-back for the usual three). Aggregate related businesses under §448(c)(2), which reaches §§52(a), 52(b), 414(m) and 414(o), so a small company inside a controlled or affiliated service group may fail. Separately, a §52 controlled group is one taxpayer for the annual cap (§45F(e)(1)). Yes gives the 50% rate and the $600,000 cap; No gives 40% and $500,000.
%
21% for a C corporation. 37% is the top individual bracket, made permanent by P.L. 119-21. For a pass-through enter the owner's marginal rate rather than the entity's. The §199A qualified business income interaction is not modeled. The suggestion changes with the return type; the model uses whatever is entered here.
%
4.99% for tax years beginning in 2026, for individual, corporate and PTE-election filers alike (H.B. 463 of 2026, down from 5.19%). The individual rate steps down 0.125 points a year toward 3.99% only if revenue targets are met; the corporate rate is described as set at 4.99%. A lower rate lowers every 50%-of-liability ceiling.
Step 2

Income and expenses

Drives federal taxable income, the §38 limit and Georgia liability.
$
Entity-level revenue for the year. Leave at zero to switch off the federal tax-liability limit and model the credit on spending alone.
$
All deductible expenses other than the child care spending entered in Step 3, which is added separately so that the deduction reduction can be shown.
$
Anything else that moves book income to federal taxable income. Enter a negative number to reduce income.
$
Georgia starts from federal taxable income. Enter the Georgia-specific additions and subtractions here. If you claim Credit 104, Reg. 560-7-8-.38(3)(c) requires Georgia taxable income to be increased by the depreciation on the credited property; that add-back is not modeled automatically, so enter it here.
Step 3

Child care spending

The benefit updates as you type.
$
Facility, operating, contracted places, intermediary and joint-facility spending (tracker categories 1 to 5). Exclude dependent care assistance plan amounts and cash stipends. Amounts above the fair market value of the care are not qualified expenditures (§45F(c)(1)(B)). Payments to an intermediary that contracts with qualified facilities qualify for amounts paid after December 31, 2025.
$
The 10% category. It shares the same annual cap as the child care component. Guidance has not yet distinguished an intermediary arrangement from resource and referral services.
$
Payments to a qualified Georgia facility under contract, or the cost of operating your own center. Often the same amount as the §45F figure, since Georgia measures its own base. Qualified child care property is excluded by §48-7-40.6(a)(1); it earns Credit 104 instead, so one dollar cannot feed both. Credit 105 also requires the child to be under 13 and the employee's Georgia dependent (Reg. 560-7-8-.38(1)(a)) and, for sponsored care, payment by you directly to the entity providing the care (Reg. 560-7-8-.38(1)(f)); neither condition is tested here.
$
Employee co-payments reduce the Credit 105 base. Enter the year's total of the amounts the providers report as paid by employees on their Provider Reporting and Receipt Forms.
Step 4

Georgia tax liability

Feeds every Georgia ceiling.
Taxable net income × the Georgia rate. A proxy only.
A straight-line proxy. It does not reflect apportionment or allocation, the Georgia addition and subtraction modifications, net operating losses or credit ordering, pass-through entity election mechanics, or owner-level limitations. For an actual taxpayer, enter the real Georgia tax liability below before relying on any Georgia figure.
Any entry here overrides the estimate.
$
Enter the actual figure before relying on any Georgia amount. This entry is required, not optional, where the liability is measured at the owner level: enter the owners' combined Georgia liability.
Step 5

Georgia Credit 162 (H.B. 136)

Potential credit, subject to DOR preapproval.
§48-7-29.28(a)(2) sets three requirements: (A) payment made directly to a child care facility in the name and for the benefit of an employee whose child is enrolled there and is under six; (B) payments totaling at least $1,000.00 per taxable year for each such employee, so exactly $1,000 qualifies; and (C) payments in addition to, and not in lieu of, other compensation and benefits. The threshold is per employee; the credit is per child. A reimbursement to the employee is not a payment made directly to a facility.
The under-six limit is statutory: §48-7-29.28(a)(2)(A) defines eligible payments as made for an employee whose child is enrolled at the facility "and is under the age of six." The facility must be a child care learning center or family child care learning home permitted, licensed or commissioned by DECAL; a license-exempt program does not qualify. Quality Rated status is not required.
A two-part test under §48-7-29.28(b)(2): this must be the first taxable year in which you made eligible payments, and in no prior year may you have paid for, reimbursed or otherwise subsidized employee child care in any form. An earlier arrangement that did not itself qualify still leaves you at the $500 rate. Whether a salary-reduction dependent care plan counts as subsidizing is unaddressed.
Leave at zero if not yet approved.
$
§48-7-29.28(e): the Department preapproves within thirty days, in the order properly completed applications were submitted, prorating same-day applications where the remaining pool is insufficient. The pool is $20 million a year. The Department says the application is filed electronically through the Georgia Tax Center; as of November 1, 2026 no opening date, form or rule under subsection (f) had been published. With no preapproval the figure below is theoretical and should not be used on a return.
Step 6

Georgia Credit 104 (child care property)

Only if you acquired or built a facility.
$
Real and tangible personal property used exclusively for the facility, expressly including land, improvements, buildings, furniture, fixtures and equipment (§48-7-40.6(a)(6)). The facility must be licensed or commissioned by DECAL and at least 95% of the children must be children of your employees (children of another employer's employees count only where the property is co-owned or the employers are in the same §1504(a) affiliated group). The credit is 100% of cost, claimed at 10% a year for ten years, with a fourteen-year recapture. Enter the depreciation add-back in Step 2.

How the numbers are built

Each block opens to show the working.
▶Federal §45Fbenefit
▶Georgia Credit 105 — operating or sponsorship (Form IT-CCC75)usable
▶Georgia Credit 104 — child care property (Form IT-CCC100)usable
▶Georgia Credit 162 — H.B. 136usable
▶Combinedfederal + Georgia

How the credits interact. Federal and Georgia: §45F(f)(2) denies a second benefit only under another provision of the Internal Revenue Code, so it does not reach a Georgia credit. The two §48-7-40.6 credits: their 50% ceilings are measured separately, each on liability computed without regard to any other credit (§48-7-40.6(c)(1), (e)(2); Reg. 560-7-8-.38(2)(b), (3)(a)), so together they can reach 100% of liability; the same dollar cannot support both, because cost of operation excludes qualified child care property. Credit 105 or 104 together with Credit 162: unresolved. Neither statute contains an ordering rule, an exclusivity clause or a same-expenditure limitation, and the rules §48-7-29.28(f) directs the commissioner to issue have not been written. The combined figure above assumes the same payments can support both; the conservative figure counts Credit 162 alone. Ordering: claim Credit 162 first, since it needs preapproval, is capped at 100% of liability, has no carryforward or carryback and is repealed after 2030; then Credit 105, which carries forward five years; then Credit 104, which carries forward three. Pass-through entities: Reg. 560-7-8-.38(4) passes the §48-7-40.6 credits to owners by year-end profit and loss percentage; §48-7-29.28 says nothing about pass-through treatment. Confirm every position for the specific taxpayer before filing.

▶Expenditure tracker (optional)§45F-eligible logged$0

One line per payment. The category decides which credit the amount supports. If your accounting or payroll system already records the date, payee, category, employee, child, invoice and amount of each payment, use that record instead and enter the totals in Step 3. Rows are kept in this browser only; download the CSV to keep a copy.

Date paidProvider / payeeCategoryEmployeeChildInvoice #AmountAt or below FMV?Notes / evidence

Amounts above the fair market value of the care are not qualified expenditures. Payments to a third-party intermediary that contracts with a qualified facility, and an allocated share of a jointly owned or operated facility, are both eligible under §45F for amounts paid after December 31, 2025; keep them in their own categories so they can be reported separately if later guidance requires it. Dependent care plan amounts and cash stipends are separate benefits and are not §45F expenditure.

▶How the money and the benefit move: four structures compared

Educational comparison, not a recommendation. Amounts are illustrative and assume a 21% federal rate and the 2026 Georgia rate of 4.99%. Model A is the "paying for places" structure most employers will use; Model D became creditable federally for amounts paid after December 31, 2025. Review any specific arrangement before implementing it.

A — Employer contracts placesB — Employer runs an on-site centerC — Employer funds a DCAP onlyD — Employer pays through an intermediary
What the employer doesSigns a contract with a licensed center to reserve or fund places for employees' children.Builds or operates its own qualified child care facility on premises.Sets up a §129 Dependent Care Assistance Program; employees elect pre-tax deferrals.Contracts with a benefits platform, network or nonprofit intermediary that in turn contracts with licensed facilities.
Where the money goesEmployer pays the provider directly. The employee may pay a co-pay to the provider.Employer pays staff, rent, food, supplies and capital costs of its own center.The employee's own pre-tax dollars reimburse the employee's chosen provider.Employer pays the intermediary, which remits to the facilities. Any fee the intermediary keeps should be identified separately.
Taxable to the employee?Excluded from wages only under a written §129 dependent care assistance program, up to $7,500 ($3,750 married filing separately) for 2026; otherwise the value is taxable wages. Confirm the W-2 treatment with your payroll adviser.Same rule as A; the benefit from an on-site facility is valued under §129(e)(8).Excluded up to $7,500 ($3,750 married filing separately) for 2026. Permanent, not indexed.Same rule as A, so long as the care is furnished and not cashed out.
Federal §45FQualifies. 40% (50% small business) of amounts paid under the contract.Qualifies. Operating costs at 40%/50%; capital costs reduce basis.Does not qualify. DCAP contributions are not §45F expenditures.Qualifies for amounts paid after December 31, 2025. Guidance on where the intermediary line sits versus resource and referral is pending.
Georgia Credit 105 / 104Qualifies as employer-sponsored care: 75% of cost of operation less employee payments (IT-CCC75).Qualifies as employer-provided care: 75% operating (IT-CCC75) plus 100% of property over ten years (IT-CCC100).Does not qualify as employer-provided or sponsored care.Doubtful. Reg. 560-7-8-.38(1)(f) defines employer-sponsored care as care paid for by the employer directly to the entity providing it; an intermediary sits between. Georgia has not conformed to the 2026 federal rule and no Georgia ruling addresses the point. Treat Credit 105 as at risk, document the flow-through, and consider direct contracting.
Georgia Credit 162Qualifies if you pay the DECAL facility directly, in the employee's name, at least $1,000 a year per employee, for a child under six, and DOR preapproves.Does not fit the statute cleanly: the payment must be made to a facility on the employee's behalf, not spent running your own center. Confirm before claiming.Does not qualify: the employee's own pre-tax dollars are not an employer payment in addition to other compensation.Uncertain. The statute contemplates a direct payment to the facility in the employee's name; an intermediary sits between. No DOR rule exists. Get preapproval guidance in writing.
Employer deductionDeductible, reduced by the §45F credit claimed.Operating costs deductible less the credit; facility basis reduced by the credit.Deductible as a compensation or benefit expense.Deductible, reduced by the §45F credit claimed. The intermediary's retained fee follows its own character.
Illustration: $100,000$40,000 federal credit plus about $12,600 of deduction savings at 21%, about $52,600 federal benefit. Georgia: 75% is $75,000, usable up to 50% of Georgia tax, which at 4.99% takes roughly $3,006,000 of Georgia taxable income to absorb in one year.Same federal arithmetic on operating spend. Capital spend runs through basis, not a current deduction, and earns the separate Georgia property credit at 10% a year.No credit. The benefit is the payroll and income tax effect of the exclusion only.Same federal arithmetic as Model A on the amount that reaches care. Isolate any intermediary fee before applying the 40% or 50%.
Main burdenVetting licensing, contracting, invoices, nondiscrimination, recordkeeping. The lowest lift.Everything in A plus running a licensed center, the 95% test and both recapture windows (ten years federal, fourteen years Georgia property).Plan administration and §129 nondiscrimination testing.Everything in A, plus proving the chain: your contract, the intermediary's contract with each facility, and what reached care.
Who it fitsMost employers, especially those near an existing licensed provider.Large employers with density, capital and a long horizon.Employers wanting a low-cost benefit with no employer-side credit.Employers with dispersed workforces or no single nearby provider.

Combining models. An employer may potentially combine a §45F arrangement with a §129 dependent care plan, but the same expenditures cannot be counted twice and the specific funding arrangement should be reviewed before implementation. Nothing in §45F or §129 makes maintaining a dependent care plan a disqualifier; what no published authority addresses is whether one identical dollar can be both excluded from an employee's income under §129 and treated as the employer's creditable expenditure. Quality Care for Children offers to administer a program for employers (verifying providers, collecting their reports and invoices, keeping the file); an employer that intends to claim the Georgia credits should keep its own payment direct to each facility, or confirm a paying-agent structure with its tax adviser first.

▶Rules built into this calculator, what it does not test, and sources

Federal §45F (tax years 2026 and later, P.L. 119-21)

40% of qualified child care expenditures, or 50% for an eligible small business, plus 10% of resource and referral expenditures, capped as to the credit, not the spending, at $500,000, or $600,000 for a small business, indexed after 2026. With no resource and referral spend the cap binds above $1,250,000 of qualified expenditure at 40%, or $1,200,000 at 50%; each resource and referral dollar lowers those thresholds by $0.25 and $0.20. One cap per employer however many facilities are used; a §52 controlled group shares one cap. Nonrefundable; carried back one year and forward twenty (§39). The deduction is reduced by the credit determined (§45F(f)(2)); the basis of acquired or constructed property is reduced separately (§45F(f)(1)). The §38(c) limit is modeled on its 25%-of-net-regular-tax-above-$25,000 prong only; the tentative minimum tax prong is ignored, so the usable credit may be overstated. In a controlled group the $25,000 is apportioned. Recapture reaches acquisition and construction credits for ten years. Payments to an intermediary that contracts with a qualified facility, and a facility jointly owned or operated with other businesses, qualify for amounts paid after December 31, 2025.

Georgia §48-7-40.6 (Credits 105 and 104)

75% of cost of operation less amounts paid by employees (Form IT-CCC75, credit code 105), and 100% of qualified child care property claimed at 10% a year for ten years (Form IT-CCC100, credit code 104). Each is capped at 50% of Georgia income tax liability computed without regard to any other credits, the two ceilings measured separately. Carryforward is five years for the operating credit, from the close of the year the cost was incurred, and three years for the property credit, from the close of the year each installment is claimed; recapture on property runs fourteen years (§48-7-40.6(a)(9)). Not tested here: Credit 105 reaches only a child under 13 who is a dependent for whom the employee can claim a Georgia exemption (Reg. 560-7-8-.38(1)(a)); employer-sponsored care must be paid by the employer directly to the entity providing it (Reg. 560-7-8-.38(1)(f)); the 95% test for property; and the records Reg. 560-7-8-.38(2)(d) requires (employee names and SSNs, children's names, ages and SSNs where the child is one or older, the provider's name and FEIN), with Forms IT-CCC75 and IT-CCC100 attached to the return as conditions of the credit.

Georgia §48-7-29.28 / H.B. 136 (Credit 162)

$500 per qualifying child under six, or $1,000 in the first year under a two-part test. Payments must be made directly to a DECAL permitted, licensed or commissioned center or family child care learning home, in the name and for the benefit of the employee, and must total at least $1,000 per taxable year per employee. $20 million statewide cap, DOR preapproval within 30 days in order of submission, capped at 100% of Georgia liability, no carryforward or carryback, repealed December 31, 2030. The Department says the preapproval application is submitted electronically through the Georgia Tax Center; no rule under §48-7-29.28(f) and no opening date had been published as of November 1, 2026. The statute is silent on pass-through treatment. Treat this credit as potential until preapproved.

Georgia rate

For tax years beginning in 2026 the Georgia individual and corporate rate is 4.99% (H.B. 463 of 2026), down from 5.19%. A lower rate means a lower 50%-of-liability ceiling and so a smaller usable Georgia credit.

Sources

  • IRS, Employer-provided child care credit: tax year 2026 and later; IRS, About Form 8882 (posted revision 12-2017; draft Form 8882 and instructions marked Rev. December 2026 posted on the IRS draft-forms site, not for filing, as of October 29, 2026).
  • 26 U.S.C. §§38, 39, 45F, 129, 448(c) as amended by P.L. 119-21; Rev. Proc. 2025-32 (the $32,000,000 gross receipts threshold for 2026).
  • O.C.G.A. §§48-7-40.6 and 48-7-29.28; Ga. Comp. R. & Regs. r. 560-7-8-.38 (last amended 2010) and r. 560-7-3-.03(7); Ga. H.B. 136 (2025); Ga. H.B. 463 (2026).
  • Georgia Department of Revenue: Tax Credits (codes 104, 105, 162); Georgia Employer Childcare Expense Credit; Employer's Credit for Providing or Sponsoring Child Care; Employer's Credit for Purchasing Child Care Property; 2025 Summary of Enacted Legislation.

This calculator is general educational and planning material prepared for Quality Care for Children by MMA CPA INC. It is not a filing calculator, and no figure it produces should be carried to a return without independent computation. It reflects law and guidance available as of August 29, 2026, with Department of Revenue and IRS pages re-checked November 1, 2026, including P.L. 119-21 and Georgia H.B. 136 (2025) and H.B. 463 (2026). It is not legal or tax advice, does not create a client relationship, and should not be relied upon as a filing position. Treasury and the IRS have issued no substantive guidance on the 2026 §45F changes; open items include how an intermediary arrangement is distinguished from resource and referral, how the credit is allocated among the owners of a jointly owned facility, what substantiation is required, whether state or local cost-sharing dollars are treated as the employer's expenditure, and how back-up and drop-in care are handled. Georgia requires preapproval for credit code 162 through the Georgia Tax Center but has issued no regulation under §48-7-29.28(f). Rates, thresholds, indexing, preapproval procedures and documentation requirements should be confirmed with the employer's own tax adviser, and against current IRS and Georgia Department of Revenue materials, before any of these credits is claimed.

Quality Care for Children · Cobb Community Foundation initiative · Prepared by MMA CPA INC., Mohamed Aalen, CPA, MBA, EA, 160 Clairemont Ave., Suite 200, Decatur, GA 30030.

The Three Credits on One Screen

Use this side-by-side comparison to decide which credits fit your business, then make your selection.

Federal §45F Georgia Credit 105 Georgia Credit 162
Rewards 40% of qualified child care spending (50% for an eligible small business), plus 10% of resource and referral spending 75% of the cost of employer-provided or employer-sponsored child care, less amounts paid by employees $500 per child; $1,000 per child in the employer's first year
Ceiling Credit capped at $500,000 ($600,000 small business); nonrefundable 50% of Georgia income tax 100% of Georgia income tax; $20 million statewide pool each year
Child's age No age limit Under 13, and a dependent the employee can claim on a Georgia return Under six
Facility Licensed under state law. License-exempt programs: not yet settled Licensed facility Child care learning center or family child care learning home with a DECAL permit, license or commission
Payment Under a contract with the facility (or, from 2026, through an intermediary that contracts with facilities) By the employer directly to the provider Directly to the facility, in the employee's name; at least $1,000 per employee a year; in addition to pay
Claimed on Form 8882, then Form 3800, then the return Form IT-CCC75 attached to the Georgia return The Georgia return, after DOR preapproval through the Georgia Tax Center
Carry Back one year, forward twenty Forward five years None. Use it first.
What it is worthIn the Toolkit Guide's worked example, a 20-person eligible small business spending $50,000 on contracted places for eight children under six recovers about $38,983 in the first year ($25,000 federal credit, $5,250 of tax saved on the remaining deduction, $8,733 of Georgia credit) and carries $36,767 of Credit 105 forward. The credits are nonrefundable, so run your own figures in the Credit Calculator. The Georgia figure assumes both Georgia credits apply to the same payments, which is not yet settled.

A fourth credit, Georgia Credit 104, applies to the cost of acquiring or building a child care facility. It is outside this pathway; the calculator can model it and the Toolkit Guide explains it.

Employer Child Care Tax Credit Toolkit developed by Quality Care for Children with support from the Cobb Community Foundation