By First Five Years Fund
In the United States, two-thirds of young children live in households where all available parents are working. Meaning child care is essential for families’ ability to stay in the workforce. An effective but often overlooked tool in the federal tax code to help expand access to child care is the Employer-Provided Child Care Credit, known as 45F. This provision supports employers that want to help provide or arrange child care for their employees, strengthening the supply of care and improving affordability for working families.
The credit was significantly updated in the 2025 tax reconciliation package, strengthening incentives for employers, especially small businesses, to participate in child care solutions.
Here are the First Five Things to know about how 45F supports child care access and affordability:
- 45F is designed to encourage employer participation in child care solutions. Through the credit, businesses can be reimbursed for part of the cost when they build, operate, or contract for child care to support their workforce.
- Employers have multiple pathways to use 45F. Companies may operate an on-site child care program or partner with a licensed provider to offer child care slots or expanded capacity for employees’ children. These partnerships can help stabilize providers by offering predictable enrollment and revenue.
- The credit amount is substantial and larger for small businesses. Large businesses can apply up to $500,000 of qualified child care expenses toward the credit, while small businesses can apply up to $600,000 (up from $150,000 in previous years). Small businesses also have the option to pool resources to jointly fund child care options.
- 45F supports both child care supply and workforce participation. By helping employers invest in child care options, the credit can increase the number of available child care slots and help parents remain in the workforce, benefiting families, employers, and local economies.
- 45F is part of a broader strategy to strengthen child care nationwide. When paired with strong federal programs and other family-focused tax provisions, 45F plays a key role in expanding access, reducing costs, and supporting the child care providers who form the backbone of communities.
First Five Years Fund works to protect, prioritize, and build bipartisan support for quality child care and early learning programs at the federal level.
Reliable, affordable, and high-quality early learning and child care can be transformative, not only enhancing a child’s prospects for a brighter future but also bolstering working parents and fostering economic stability nationwide.
We work with Congress and the Administration to identify federal solutions that work for families with young children, as well as states and communities.
We work with policymakers to identify ways to increase access to affordable, high-quality child care and early learning programs for children.
And we collaborate with advocacy groups to help align best practices with the best possible policies.
