Take Advantage of Employer Provided Child Care Tax Credits

Oregon

Oregon is among 20 states in the United States that offers a state tax credit for dependent care assistance provided to employees. Oregon’s dependent care tax credit is taken against the company’s state tax liability and permits an employer to offset 50% of its child care expenditures against its state tax liability. The credit allows an annual limit of $2,500 per employee.

The state tax credit for child care applies costs associate with:

  • contracting with a 3rd party child care provider
  • purchasing employee’s child care though payments to a 3rd party child care provider
  • providing direct subsidies or vouchers to employees
  • contracting for child care resource and referral services

Mississippi

Mississippi allows an income tax credit for employers providing dependent care for its employees during the employee’s working hours. The credit allowed is 50% of qualified expenses, such as the next cost of any contract executed by the employer for a 3rd party to provide dependent care, expenses or, if an employee elects to provide dependent care directly, then the qualified expenses are expenses for staff, learning, and recreational materials and equipment, and cost associated with the construction and maintenance of a facility. This credit can offset up to 1005 of the income tax due from the entity. Any excess credit will not be refunded, but can be carried forward for up to 5 years.

An employer must have its child care program certified by the Department of Health for programs serving children 12 years of age and younger and for programs serving elderly adults. The State Tax Commission certifies programs serving dependents older than 12 years of age. To qualify, the facility must have an average daily enrollment for the taxable year.

Don’t forget about the federal tax credit for employer provided child care.

In June 2001, as part of the Economic Growth and Tax Relief Reconciliation Act, Congress enacted into law the first federal employer tax credit for child care. Beginning in tax year 2002, the law allows employers a 25% credit for the costs of acquiring, constructing, rehabilitating, or expanding a child care facility, the costs of operating a child care facility, or the costs of contracting with a 3rd party child care provider. In addition, the law gives employers a 10% credit for the costs of providing child care resources and referral services to employees. The total credit has an annual limit of $150,000 in tax assistance per employer. The employer-provided child care credit is made a part of, and subject to, the limitation and carryover provisions of the general business credit. The credit is permanent with no expiration date.

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