The One Big Beautiful Bill Act (OBBBA) substantially expanded the employer childcare credit starting in 2026.

The maximum annual credit has been increased by up to 400 percent, and more types of childcare expenses can qualify. It is also now possible for small businesses to work jointly to provide childcare support to their employees and obtain the credit.

What Is the Employer Childcare Credit?

The employer childcare credit is a non-refundable general business credit for certain childcare expenses a business pays for its employees. Expenses that qualify for the credit include1

the costs of acquiring, constructing, rehabilitating, or expanding an on-site qualified childcare facility;

the costs of operating an on-site qualified childcare facility (including training costs, compensation for employees, and scholarship programs);

the costs of contracting with an off-site qualified childcare facility to provide childcare for employees;

the costs of contracting with an “intermediate entity”—that is, a third party—that contracts with one or more qualified childcare facilities to provide childcare services; and

the cost of childcare referral services.

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