How enhanced 45F childcare tax credit can increase your benefits buying power

• Key insight: The reason benefit leaders should re-evaluate the 45F tax credit for 2026 and beyond.
• Supporting data: 46% of children living in a specific type of underserved region.
• Forward look: Enhanced federal childcare credit can sometimes be stacked with state and other options to create more options for employers.
  Source: Bullets generated by AI with editorial review

As the childcare crisis continues to loom over working parents, benefit leaders should assess whether 2026's expansions to the 45F Employer-Provided Child Care Tax Credit enable them to increase supportive benefits. 

Childcare expense and access has long been a stress point for employees, with rising costs, lack of space with nearby providers, or lack of providers altogether. The price for care increased 29% between 2020 and 2024, according to Child Care Aware of America, and 46% of children live in a licensed childcare desert, reports The Center for American Progress. More working parents are asking their employer for a solution, but tight budgets make childcare a challenge for leaders, too. 

"The focus should be around how we can potentially better finance childcare through some of the tax credits that have been adjusted for 2026. [These changes] not only increase the dollar amount, but also expand the categories of eligible expenditures," said Kelly Polinsky, VP of population health and well-being at insurance firm Brown and Brown.

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IRS.gov summarizes the enhancements to 45F under the Working Families Tax Cuts Act on its website: 

• An increase of allowed credit for any taxable year from $150,000 to $500,000 ($600,000 for eligible small businesses) and adjusting such amounts for inflation after 2026;
• An increase of the percentage of qualified childcare expenditures that are used to determine the credit from 25% to 40% (50% for eligible small businesses); 
• Addressing joint ownership or operation of a qualified childcare facility.

For benefit leaders — even those building plans for small businesses — this could mean it now makes sense to look into providing childcare offerings that were previously out of reach for their company. 

"Somebody leading benefits … shouldn't necessarily have to understand all of the technicalities themselves, but they should be coming away with, 'How does this affect my buying power in this benefit category, and who do I need to keep accountable to make sure that that comes through,'" Polinsky said. 

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A more inclusive credit

Polinsky points out that where previous tax credit options have been set up for employer on-site childcare facilities, the new enhancements make 45F more flexible and modern. The Bipartisan Policy Center lists qualifying expenditures for 45F as "the cost of contracting with a childcare facility, constructing or enhancing property to be used as a childcare facility, associated operating costs, fees paid to intermediaries, and resource and referral services provided to or contracted for workers, among other expenditures."  

She also encourages benefit leaders to look at how 45F can be applied alongside other available credit options. "The federal 45F is at the federal level, so that would apply anywhere domestically. But there are also state-specific credits available, and those are sometimes stackable," she explained. In addition to company finance leaders, benefit decision-makers should have conversations with any relevant third-party partners.  

"There's a form called Form 8882 that they can complete and provide, and that is a question to ask if you're in an RFP for a vendor or you're working with a vendor: Do you track and help document, or even help to file some of these forms to ensure we receive the maximum tax credit, and assist with state credit filings if eligible," Polinsky said. "Both in terms of being a fiduciary of the the way the benefit should be administered, and then ensuring that they are eligible for the tax credit, it's important that the third party has strong oversight and auditing in place to make sure that the benefit's being administered according to both the employer's program and to ensure that it's eligible for the tax credit." 

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The retention factor

As employers look to set themselves apart, finding ways to help working parents manage their childcare needs is a good way to retain talent. 

"Where an employer might not be in a position to increase wages directly, they can be looking for these kinds of benefits supplementally to improve their overall total rewards and improve the employee value proposition," Polinksy said. 

It can also be packaged with other benefits that help new mothers return to work, suggested Polinsky — a transition that currently leads to many leaving their employer or cutting back on work due to childcare challenges. 

"Some of these programs can be creatively paired with supporting the parental or short-term disability leave process, so that even before somebody's preparing to go out for leave, the employer can say, 'Through our program and through our subsidy, we'll be able to hold this spot for your child at a licensed [facility] of your choosing within this network, and it's going to cost you half [of what it normally would].' What an immense relief that would be, and how much more likely would that person be to return to work after their leave if that is something that's already worked out?"