FAQ

Four, in two systems. The federal system has one credit, the employer-provided child care credit under Section 45F, claimed on Form 8882 and carried into the general business credit.

The Georgia system has three. Credit 104 is for the cost of qualified child care property. Credit 105 is for the cost of operating employer-provided or employer-sponsored child care. Credit 162 is the newer credit created by House Bill 136 for direct payments to a licensed facility on behalf of an employee's child.

The four are separate credits with separate tests. A payment that earns one does not automatically earn another.

Yes. Nothing in either system bars claiming both. They are computed independently, on different bases, with different ceilings.

The practical result is that a single well-documented arrangement can produce a federal credit, a federal deduction reduction, and one or more Georgia credits at the same time. The worked example later in this part shows the effect.

Not for credits 104 and 105. The cost of qualified child care property is excluded from the base of the operating credit, so one dollar cannot feed both.

Whether the same dollar can support both credit 105 and credit 162 is not addressed by statute or regulation. The conservative position is that it cannot, and an employer planning around the assumption that it can should treat that as an exposed position. Appendix B lists this as an open item.

Status: unresolved for credits 105 and 162. No authority addresses whether the same dollar can support both. See Appendix B, item B5. The exclusion of property cost from the credit 105 base is established.

Credit 162 first. It has no carryforward and no carryback, it is capped at the whole Georgia liability rather than half of it, and it is repealed for tax years beginning on or after January 1, 2031. A dollar of credit 162 that is not used in its year is lost.

Credits 104 and 105 carry forward, so they are the better candidates to defer.

For amounts paid or incurred after December 31, 2025, the credit is 40 percent of qualified child care expenditures, and an eligible small business takes 50 percent. There is also a 10 percent rate for resource and referral expenditures. The credit an employer can claim in a year is capped at $500,000, or $600,000 for an eligible small business, and the two components share that single cap. The figures are indexed for inflation after 2026.

The cap is on the credit, not on the spending. An employer may spend more than $500,000 on qualifying child care; what the cap limits is the credit that spending generates. For an employer with no resource and referral spending, the cap binds once qualifying child care expenditure passes $1,250,000 at the 40 percent rate, or $1,200,000 at the 50 percent small business rate. Because the two components share one cap, any resource and referral spending pulls those figures down: each dollar of it reduces the child care break-even by 25 cents at the 40 percent rate and 20 cents at the 50 percent rate.

Both the rate and the cap were increased at the end of 2025. Form 8882 as posted still carries a December 2017 revision date and still computes the credit at 25 percent with a $150,000 cap. The form has not been updated. Do not use the printed rate on the form as a check on the calculation.

Average annual gross receipts under the threshold in Section 448(c), measured over the five preceding taxable years rather than the usual three. Section 45F substitutes the five-year period.

A three-year average is the ordinary Section 448(c) test read without that override. Using it will give the wrong answer for a business whose receipts have moved.

One. All persons treated as a single employer under the controlled group and common control rules share a single annual dollar cap.

There is a second, different aggregation rule for the small business test. That one reaches the controlled group rules and the affiliated service group and anti-abuse rules as well. The two rules do different work and both should be run.

Three categories. Amounts paid to acquire, construct, rehabilitate, or expand a qualified child care facility that the employer will operate. Operating costs of a qualified child care facility, including employee training, scholarship programs, and higher compensation for staff with child care credentials. And amounts paid under a contract with a qualified child care facility to provide child care services to employees.

For amounts paid after December 31, 2025, the third category also reaches contracts with an intermediary that in turn contracts with one or more qualified facilities.

No. The contract route is the most common structure and requires no facility ownership. An employer contracts with an existing licensed center for reserved seats or for tuition support and claims the contract payments.

Building or acquiring a facility produces a larger credit but brings the basis reduction and the recapture rules with it.

Federally, yes, for amounts paid after December 31, 2025. Two conditions attach. The chain has to terminate in a facility that itself qualifies, so the intermediary's own status is not enough. And the fair market value limit still applies to the whole payment, so an administrator's markup does not become creditable simply because it is invoiced as part of the care.

On the Georgia side the answer is different and is covered below. This is the sharpest federal-state divergence in the current law. Quality Care for Children offers to administer the program for employers; question 36 explains how to use that service without putting the Georgia credits at risk.

Status: established federally for amounts paid after December 31, 2025. Unresolved for Georgia credit 162. See Appendix B, item B2.

Amounts paid under a contract are creditable only to the extent they do not exceed the fair market value of the care provided. An above-market payment is not converted into a creditable expenditure by the contract.

The practical consequence is invoicing. Care and administration should be stated separately on the invoice so that the care component can be tested against market rates on its own.

The facility must have child care assistance as its principal use, and it must meet all applicable state and local laws and regulations, including licensing as a child care facility.

A facility that is the principal residence of its operator is excused from the principal use requirement. It is not excused from the licensing requirement. A home-based provider still needs the license.

Three further conditions apply. Enrollment must be open to employees during the year. If child care is the employer's own principal trade or business, at least 30 percent of enrollment must be children of employees. And the use of the facility must not discriminate in favor of highly compensated employees.

No. It applies only where the operation of the child care facility is the taxpayer's principal trade or business. For an ordinary employer it is not reached.

The nondiscrimination condition applies to everyone.

Section 45F states none. The under-13 limit that appears in the dependent care credit and in the dependent care assistance exclusion is not incorporated into Section 45F.

Georgia credit 105 does have an age limit, supplied by regulation rather than by statute. An employer claiming both credits for the same child may find that the child qualifies federally and not for Georgia.

The deduction for the expenditures is denied to the extent of the credit claimed. The remainder stays deductible.

Separately, where the credit is claimed on acquired or constructed property, the basis of that property is reduced by the credit. These are two different rules in two different subsections and are sometimes confused with each other.

Recapture reaches the acquisition and construction credit only, not contract payments and not operating costs. If the facility ceases to be a qualified child care facility, or is sold or otherwise disposed of without the buyer assuming the obligation, part of the credit is recaptured.

The recapture percentage declines with time. It is 100 percent in the first year and steps down through 85, 70, 55, 40, 25, and 10 percent, reaching zero after the tenth year.

Not necessarily. Section 45F is a general business credit, and the general business credit is limited to net income tax less the greater of the tentative minimum tax or 25 percent of net regular tax above $25,000. The $25,000 amount is apportioned among the members of a controlled group.

Section 45F is not one of the specified credits that get relief from the tentative minimum tax floor, so a taxpayer in that position does not get the treatment that applies, for example, to the paid family and medical leave credit. Unused amounts carry back one year and forward twenty, subject to the same ceiling in each of those years. A first-year business has no prior year to carry back to.

The credit for the cost of qualified child care property. It is claimed over ten years at ten percent of the cost per year, and it is capped in each year at 50 percent of Georgia income tax liability.

It carries an income cost that is easy to miss. Depreciation on the property is added back in computing Georgia taxable net income, so the credit is worth less than its face amount to a taxpayer with substantial depreciation. Model it manually; it is not built into the standard calculation.

A 95 percent test applies to this credit. It sits inside the definition of qualified child care property and does not reach the operating credit.

The credit for the cost of operation of employer-provided or employer-sponsored child care. It is 75 percent of the employer's direct cost, capped at 50 percent of Georgia income tax liability, with a five-year carryforward.

The 50 percent ceiling is computed without regard to the other child care credit. Credits 104 and 105 do not share one ceiling. Together they can reach the full Georgia liability.

Three. The regulation defines a qualifying child as under 13 and a dependent of the employee for whom the employee may claim a Georgia exemption, even though the statute states no age limit. A 14-year-old in after-school care fails the Georgia test and passes the federal one.

The regulation requires the cost to be paid by the employer directly to the entity providing the child care. That is a real obstacle to a benefits platform or administrator structure, and it is the point at which Georgia and the 2026 federal rules diverge.

Employer-provided care is limited to a facility on the premises of the employer within Georgia. The definition of employer-sponsored care contains no location language at all, which is a gap in the drafting rather than a permission.

The credit created by House Bill 136 for employer payments to a licensed child care facility on behalf of an employee's child. The Department of Revenue publishes it as credit code 162.

The employer must pay at least $1,000 in the taxable year for each employee for whom the credit is claimed. The credit itself is computed per child. The statute says at least $1,000; a fiscal note describing it as more than $1,000 does not control.

The first year rate is higher. First year is a two-part test: it must be the first year of eligible payments, and there must have been no payment, reimbursement, or subsidy of employee child care in the prior year. Both parts have to be satisfied.

Three, stated in the statute. The payment must be made directly to the facility. It must be in the name and for the benefit of the employee. And it must be in addition to and not in lieu of other compensation.

The statute does not say that a payment cannot be a reimbursement, and it does not say that a payment cannot run through payroll. Those are inferences from the three conditions above, and reasonable ones, but they are not text. Direct payment is presented throughout these materials as the conservative reading, not as a statutory prohibition.

Status: the three conditions are established. The further reading that a payment may not be a reimbursement or run through payroll is a conservative interpretation and is not compelled by the text. See Appendix B, item B6.

Applications are filed electronically through the Georgia Tax Center. The Department of Revenue acts within 30 days. Applications are taken in order of submission, and applications received on the same day are prorated if the annual cap is reached that day.

The credit is capped at 100 percent of Georgia liability, not 50 percent. There is no carryforward and no carryback. Preapproval should be treated as a calendar item, not a filing-season item.

Yes. The child must be under the age of six. The limit is statutory: it sits inside the definition of eligible child care payments, which requires 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 the age of six.

It is easy to miss because it is not written as a separate definition of a qualifying child. Note also that House Bill 136 created a second, unrelated credit for individuals that carries its own under-six limit. Both limits are real; one is not an import of the other.

Status: established. O.C.G.A. 48-7-29.28(a)(2)(A), confirmed against the enrolled act and the Department of Revenue’s published description of the credit.

A child care learning center or a family child care learning home that is permitted, licensed, or commissioned by the Department of Early Care and Learning.

A permit is a temporary authorization, not a lesser tier. A new center operating on its initial permit qualifies.

Quality Rated participation is not required. It is a voluntary quality rating, not a licensing status, and it is neither necessary nor sufficient.

A program that holds an exemption rather than a credential does not qualify. Part Two explains why that distinction matters more than it sounds like it should.

Status: established for Georgia credit 162. The federal treatment of a license-exempt program is a separate and unresolved question. See Question 39 and Appendix B, item B1.

For credit 162, the safe course is a direct payment from the employer to the facility, in the employee's name, on top of existing compensation. A reimbursement arrangement or a payroll add is not prohibited by the statute, but it sits less comfortably against the three statutory conditions, particularly the requirement that the payment be made directly to the facility.

For Georgia credit 105 the regulation is explicit that the cost must be paid directly to the entity providing the care, so a reimbursement structure is a poor fit there as well.

There is also an employee-side consequence. See Part Three.

Status: conservative interpretation for credit 162. The direct payment requirement in the credit 105 regulation is established. See Appendix B, item B6.

Federally, a facility does not fail to qualify merely because it is jointly owned or operated by the taxpayer and others. That rule prevents disqualification. It does not say how the credit is allocated among the participants, and no authority addresses the allocation.

The practical answer is to structure the arrangement so that each employer pays its own share directly and can support its own figure from its own records. The shared facility memorandum of understanding in the template pack is drafted that way.

Georgia handles this more clearly for credit 105: a joint owner is limited to a pro rata share of the operating credit based on the children served.

Status: the federal anti-disqualification rule is established; allocation among participants is unresolved. See Appendix B, item B7. The Georgia pro rata rule for credit 105 is established.

At a minimum: the benefit policy as adopted, employee enrollment and eligibility forms, the provider's licensing verification and a copy of the credential itself, the services agreement, provider invoices showing care and administration separately, proof of payment, the expenditure tracker in the toolkit workbook (or the employer’s own equivalent record) tying payments to employees and children, the nondiscrimination working paper, and the Georgia preapproval application with the Department's response.

The documentation checklist in the toolkit runs to roughly fifty items across five parts and is the fuller answer.

A prudent policy is to retain the records for at least four years after the due date of the employer's return, including extensions, and longer if that return is under examination.

Four years is a retention convention adopted for this project, not a period imposed by Section 45F or by the Georgia statutes. It exceeds the ordinary three-year federal assessment period and provides an additional margin. It is stated the same way in every document in this set so that no one has to reconcile two different retention rules.

Status: practice convention. No child care credit provision imposes a four-year retention period. The recommendation is a margin over the ordinary assessment period.

Ask for the credential. The Department of Early Care and Learning maintains a family-facing search site, and the Quality Rated site lists rated programs, but neither is documented as displaying which credential a program holds. A program can appear in a public listing and still be operating under an exemption.

Obtain a copy of the license, permit, or commission certificate, record its number and expiration date, and re-verify annually. Part Two sets out what the provider should be giving you.

No. The Department has published nothing on the House Bill 136 credit. Its publication titled Tax Credit for Employer-Provided Child Care describes the federal Section 45F credit at the pre-2026 rates of 25 percent and $150,000 and was prepared by an outside consultancy in 2023.

It is a useful background document and it is not state guidance. It should not be cited as the Department's position on credit 162.

Illustrative example only. Actual credit amounts depend on the taxpayer's own facts, eligibility, tax liability, aggregation rules, applicable limitations, and the resolution of issues that are currently unsettled. The figures below are not a prediction of tax savings for any particular employer.

Take a 20-person C corporation with $2,000,000 of revenue and $1,800,000 of operating expense, paying $50,000 for contracted seats covering eight children, qualifying as an eligible small business, in its first year of any child care payments.

Federally: a $25,000 credit, plus roughly $5,250 of value from the remaining deduction, for about $30,250.

In Georgia, the credits earned are $37,500 under credit 105 and $8,000 under credit 162, a total of $45,500 earned. After each credit's own 50 percent ceiling, $12,367 is allowable. Georgia liability for the year is $8,733, and that is the binding constraint, so $8,733 is actually used and roughly $36,767 of credit 105 carries forward.

Combined benefit in year one is about $38,983 against $50,000 of spending, a net cost near $11,000. Earned, allowable, and usable are three different numbers, and a summary that reports only one of them will not reconcile to the carryforward.

The example assumes both Georgia credits can reach the same dollars. That assumption is unsettled. On the conservative reading the Georgia figure is $8,000, and the combined figure falls accordingly.

Status: illustration. It depends on assumptions listed at Appendix B, items B4 and B5, and should not be used as a quotation of expected benefit.

Ask your employees which child care providers they already use, and how many children are involved. That is the first step, and it is often skipped. Employers rarely want to choose a provider for an employee, and they do not have to. The providers your employees already use are the natural starting list.

Then verify the credential of each provider named, because the credential decides which credits are available. Direct contracting with a licensed center supports all four credits. An administrator arrangement supports the federal credit and leaves the Georgia position unresolved. Then decide the structure, adopt a written policy, open enrollment to all employees rather than a selected group, put the preapproval date on the calendar, and set up the expenditure tracker before the first invoice arrives.

Ask them, in writing, and keep the answers. A short form or a single email round works: which provider cares for your child, where is it, how many of your children attend, and how old are they. The enrollment form in the toolkit collects the same information in a form you can keep on file.

Two things make this worth doing before anything else. It tells you how many providers you would be dealing with, which drives whether the arrangement is administratively workable. And it tells you the age spread of the children, which decides which credits are in play at all.

No, and it should be treated as the ordinary case rather than an exception. Employees change providers, new employees arrive with providers already in place, and a program built on the assumption that the provider list is fixed at the start will not survive its first year.

Build the request into the process. The employee names the provider on the enrollment form, you verify the credential, you ask the provider whether it will contract and confirm its standard rate, and you add it to the schedule of participating facilities. Keeping that schedule separate from the policy itself means adding a provider does not require amending the policy.

It depends on what you are willing to administer. Each participating facility means an agreement, a licensing verification, a rate confirmation, periodic invoices, and a payment record. A dozen facilities is a real administrative load, though the per-facility work falls away after the first period.

This is the point at which employers consider a benefits administrator or intermediary. Before doing so, note that the federal and Georgia rules diverge here. Federal law permits qualifying intermediary arrangements for amounts paid after December 31, 2025. The Georgia regulation for credit 105 requires the employer to pay the entity providing the care directly, and Georgia has not conformed. We have found no Georgia statute, regulation, or published guidance addressing whether an intermediary satisfies that condition, so treat it as open and adverse rather than settled. An intermediary may cost you Georgia credit that direct contracting would have preserved. Model both before deciding.

Quality Care for Children offers to carry that load for employers. There are two ways to use the service. In the first, QCC verifies each provider’s DECAL status, collects the providers’ periodic reports and invoices, keeps the per-facility file, and tells you what to pay each facility each period, while your own payment goes directly to the facility. That removes most of the work and leaves the tax analysis untouched, because you are still the one paying the entity providing the care. In the second, QCC also makes the payments as your paying agent. Federal law allows that. Whether it satisfies Georgia’s direct-payment condition is the open question described above, so an employer that intends to claim the Georgia credits should use the first arrangement unless its tax adviser has confirmed the second. Terms for the service are available from QCC.

One thing more providers does not do is raise your ceiling. Each arrangement is tested on its own for whether it qualifies, but the federal annual cap is a single cap per employer across every facility. Twelve providers do not give you twelve caps.