The child care resource and referral tax credit under Section 45F of the Internal Revenue Code lets an employer claim 10% of what it pays a third-party agency to help employees find child care. You claim it on Form 8882 and carry it through Form 3800 with your annual return. For tax year 2026, the combined Section 45F credit cap is $500,000, or $600,000 for an eligible small business, and that cap covers both referral spending and any child care facility spending you also claim.
Which Employers Can Claim It
Nearly any business that pays U.S. taxes qualifies. Corporations, partnerships, sole proprietorships, and S-corporations all qualify regardless of size or industry. There is no minimum employee count, and you do not have to operate a child care facility to claim the referral portion.
Tax-exempt organizations have a narrower path. Because the credit offsets income tax liability and most nonprofits owe little or none, the practical benefit for a typical 501(c)(3) is limited. Exempt employers that owe unrelated business income tax can apply the credit against that liability through the general business credit rules.
What Spending Qualifies
A qualified expenditure is any amount paid under a contract with a service provider to deliver child care resource and referral services to your employees.1Office of the Law Revision Counsel. 26 USC 45F – Employer-Provided Child Care Credit In practice, that means paying an outside agency to maintain databases of local child care openings, verify provider licensing and safety records, and offer personalized counseling so parents can weigh their options. You are paying for informational and advisory support, not funding a daycare center directly.
The program has to be available to your entire workforce on a nondiscriminatory basis. You cannot limit the referral service to executives or highly compensated employees while excluding hourly or entry-level staff.1Office of the Law Revision Counsel. 26 USC 45F – Employer-Provided Child Care Credit For 2026, a highly compensated employee is anyone who earned more than $160,000 in the preceding year.2Internal Revenue Service. Notice 2025-67 If an audit shows the benefit was steered toward higher-paid employees, the entire expenditure can be disqualified.
Calculating the Credit
The referral credit equals 10% of qualifying expenditures for the tax year.1Office of the Law Revision Counsel. 26 USC 45F – Employer-Provided Child Care Credit If your company paid $80,000 to a referral agency, the credit is $8,000. The 10% rate stayed in place after the 2025 amendments that overhauled other parts of the credit.
Section 45F also covers 40% of qualified child care facility expenditures, or 50% for eligible small businesses. Referral spending and facility spending share a single annual credit cap of $500,000, or $600,000 for an eligible small business.1Office of the Law Revision Counsel. 26 USC 45F – Employer-Provided Child Care Credit Both thresholds will be adjusted for inflation for tax years after 2026. An eligible small business is generally one whose average annual gross receipts over the prior five years fall below a statutory threshold that is also adjusted for inflation.
Because the referral rate is only 10%, a business spending exclusively on referral services would need $5 million in qualifying expenditures to reach the $500,000 cap. For most employers, the cap only starts to matter when they are also funding a facility.
When the Credit Is Bigger Than Your Tax Bill
If the calculated credit exceeds your tax liability for the year, the unused portion is not lost. Under the general business credit rules in Section 38, you can carry an unused credit back one year or forward for up to 20 years.3Internal Revenue Service. Instructions for Form 3800 and Schedule A A low-tax year does not permanently strand the benefit of spending you already made.
Controlled Groups Share One Cap
If your business is part of a controlled group or a set of companies under common control, all members are treated as a single taxpayer for the credit cap.4Office of the Law Revision Counsel. 26 US Code 45F – Employer-Provided Child Care Credit The $500,000 or $600,000 limit applies to the group as a whole, not to each subsidiary. A parent with three subsidiaries that each spend on referral services must aggregate the expenditures and split the resulting credit among the members. Ignoring this is a common way to draw an adjustment on audit.
No Double-Dipping With Deductions
For any dollar that generates a Section 45F credit, you cannot also claim a business expense deduction or any other tax credit on the same dollar.1Office of the Law Revision Counsel. 26 USC 45F – Employer-Provided Child Care Credit If the credit is determined with respect to property, the basis of that property is reduced by the credit amount. The credit reduces your tax bill dollar-for-dollar, while a deduction only reduces taxable income, so for most employers the credit is worth more; your tax advisor can model both against your effective rate.
How to File
Report the credit on Form 8882, Credit for Employer-Provided Childcare Facilities and Services.5Internal Revenue Service. About Form 8882 – Credit for Employer-Provided Childcare Facilities and Services The form asks for your total referral expenditures for the year and walks you through the 10% calculation. The result then flows to Form 3800, General Business Credit, which consolidates all business credits against your total tax liability.6Internal Revenue Service. Form 8882 – Credit for Employer-Provided Childcare Facilities and Services
Attach both Form 8882 and Form 3800 to your annual return. Corporations file these with Form 1120; sole proprietors and individuals file them with Form 1040. The filing deadline matches your regular return due date, including any extensions.
Documentation You Need
Before filing, gather the following for each referral-service provider:
- The agency’s legal name, physical address, and Employer Identification Number
- Written service contracts describing the scope of referral services provided
- Invoices and receipts showing the total dollar amount paid during the tax year
Without the provider’s EIN, the IRS may delay processing your credit or request additional verification. Keep these records cleanly separated from general administrative expenses so you can substantiate the claim if it is questioned.
How Long to Keep the Records
The IRS generally requires you to keep records supporting a credit for at least three years from the date you filed the return claiming it, or two years from the date you paid the tax, whichever is later.7Internal Revenue Service. How Long Should I Keep Records If you carry unused credit forward, the clock restarts with each return that uses a portion of the credit, which can push your retention obligation well past three years. The safer approach is to hold onto contracts, invoices, and payment records for as long as any carryforward remains on your books.
One Boundary Worth Knowing
Section 45F has a recapture rule that adds part of the credit back to your tax if a claimed facility stops qualifying within 10 years.8Legal Information Institute. 26 USC 45F(d)(3) – Recapture Event Defined Resource-and-referral expenditures do not involve property ownership and are not subject to that recapture framework, so a referral-only claim carries no recapture exposure.