Family Business Taps into Tax Incentives with Child Care

For many family-owned businesses, growth comes with a renewed commitment to employees and the community. One such business is taking that commitment to a new level by adding an on-site child care facility — an investment in its workforce that also comes with valuable federal tax incentives.

A Strategic Step Toward Work-Life Balance

The decision to build a child care facility came after years of observing employees’ challenges in juggling work and parenting. Like many businesses nationwide, the company recognized that access to affordable, quality child care was more than a benefit — it was a necessity. For organizations that prioritize supporting their workforce and strengthening their overall operations, including those offering tax accounting solutions Brookfield, investing in reliable child care options has become an essential strategy.

“We saw too many parents struggling to find dependable child care,” said the co-owner. “It affected their peace of mind, and sometimes their ability to work. We realized that offering child care wasn’t just the right thing — it was a smart business move.”

Tapping Into the Employer-Provided Child Care Credit

To make the project financially viable, the business took advantage of the Employer-Provided Child Care Credit, a provision in the federal tax code that encourages businesses to support child care services for their employees.

Through 2025, the credit allows eligible businesses to claim up to 25% of their expenditures for employee child care facilities or resource and referral services. An additional 10% credit can be claimed for child care resource and referral services expenses. In total, the credit can be worth up to $150,000 annually. To qualify, businesses must meet specific requirements, such as ensuring the facility is licensed and that at least 30% of the children enrolled are dependents of the business’s employees. In the case of this family business, the facility is fully licensed and staffed with certified child care professionals, ensuring both compliance and high-quality care—an important consideration often highlighted by firms offering tax accounting solutions Brookfield, especially when helping clients maximize available credits.

Starting in 2026, the Employer-Provided Child Care Credit has been enhanced. First, for eligible amounts paid or incurred after December 31, 2025, the credit increases from 25% to 40% of the taxpayer’s qualified expenditures for the tax year, and the maximum dollar amount rises from $150,000 to $500,000.

Second, for qualifying small businesses, the tax break is 50% of eligible expenses up to a maximum of $600,000 for 2026. To qualify for 2026, a small business must have average gross receipts for the past three years that don’t exceed $32 million. For tax years beyond 2026, the $500,000 and $600,000 maximum credit amounts and the small business threshold will be adjusted annually for inflation.

Third, the OBBBA permits eligible small businesses to pool their resources to provide child care to employees and still claim the credit. This includes using a third party to facilitate child care services for workers. 

Making the Numbers Work

With guidance from a tax professional, the company carefully mapped out its eligible expenses. These included construction costs, staffing, supplies and licensing fees. By calculating potential tax credits early in the planning process, the owners were able to align their investment with the financial support provided by the credit.

“Having access to this credit made all the difference,” the CFO explained. “It allowed us to move forward with confidence, knowing the IRS would effectively cover a portion of our costs.”

Beyond Tax Benefits: Employee Retention and Recruitment

While the tax savings were a key driver, the business sees even greater long-term value in employee satisfaction and retention. Offering child care on-site is expected to reduce absenteeism, improve productivity and boost morale — benefits that can’t always be measured in dollars.

“It sends a message to our team: We care about you and your family,” said the HR manager. “And that matters more now than ever.”

The move has also improved the company’s recruiting power. With a tight labor market and a growing number of workers seeking family-friendly benefits, the child care facility has become a standout perk.

A Model for Other Small Businesses

The company hopes its story can inspire other small and mid-sized businesses to consider similar initiatives. While the upfront costs can be significant, the long-term returns — in employee loyalty, community goodwill and tax relief — are hard to ignore.

To help other employers understand the opportunity, the IRS provides detailed guidance on Form 8882, Credit for Employer-Provided Child Care Facilities and Services. The form and its instructions outline what expenses qualify and how to claim the credit.

Businesses considering this path are encouraged to consult tax professionals and explore state or local programs that may offer additional incentives.

Conclusion: Investing in Families Pays Off

By adding a child care facility, this family business is doing more than checking a benefits box — it’s investing in its people. Thanks to smart planning and the support of the Employer-Provided Child Care Credit, the company is proving that caring for employees and their families can be both compassionate and cost-effective.

As more businesses look for ways to stand out and support their workforce, this approach may become not just a rarity but a new standard.