Tax Benefits for Employer-Provided Child Care in Georgia

Many Employers Are Boosting the Corporate Benefits Offerings Access to High-Quality Child Care to their Employees.

Employer-provided child care benefits are designed to assist employees with child care expenses and can offer tax advantages to both employers and employees.

Employers that provide or sponsor child care for their employees can claim a federal credit of 25% of qualifying expenditures, up to a maximum credit amount of $150,000 per year (however, any amount taken as a credit cannot also be deducted from federal taxable income). In addition, state tax credits for Employer-provided child care (EPCC) are available in 18 states, including a credit for businesses located in Georgia of up to 75% of direct costs.

In addition to improvements in areas such as employee productivity, loyalty and retention, EPCC can also provide businesses and their owners with substantial tax savings,” explains Daniel Ahart, chief tax officer at the tax preparation company Daniel Ahart Tax Service®

The Georgia credit can offset up to 50% of the taxpayer’s income tax liability for the year

In addition, any excess amounts can be carried forward up to five years. Qualifying expenditures include the cost of acquiring and operating an on-site facility, or amounts paid to contract with a licensed child care program (including home-based providers). The federal and state credits, coupled with the tax savings from deducting a portion of the child care expenditures, can yield an after-tax cash surplus – that is, the tax savings can more than offset the cost of providing the child care. However, please note that tax laws and regulations can change, so it’s important to verify this information with the latest sources or a tax professional.

Here are a few key points to consider:

Dependent Care Assistance Programs (DCAPs)

These are employer-sponsored programs that allow employees to set aside a portion of their pre-tax earnings to cover eligible dependent care expenses, including child care. The contributions are not subject to federal income tax, Social Security tax, or Medicare tax.

Tax-Exempt Child Care Assistance

If an employer provides child care assistance directly to employees, up to a certain limit, these benefits may be considered tax-exempt income for employees. This means that the value of the child care assistance would not be included in the employees’ taxable income.

Employer Tax Benefits

Employers may also benefit from offering child care assistance programs. These benefits can help attract and retain employees, improve work-life balance, and enhance employee morale and productivity.

Qualified Child Care Facilities

To qualify for tax benefits, the child care facility provided by the employer should meet certain criteria. The facility should be used primarily to provide child care services for the employees, and it should comply with relevant regulations.

State-Specific Considerations

Some states, including Georgia, may offer additional tax incentives or benefits related to employer-provided child care. It’s important to check with the Georgia Department of Revenue or a tax professional to understand any state-specific provisions.

Please note that tax laws can be complex and subject to change. It’s recommended to consult with a qualified tax professional who is familiar with both federal and Georgia state tax regulations to ensure that you fully understand the tax implications of offering employer-provided child care benefits.

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