Under the One Big Beautiful Bill, for tax year 2026 the IRS increased the maximum employer-provided childcare tax credit (Section 45F) from $150,000 to $500,000 — and to $600,000 if the employer is an eligible small business. The change was confirmed in the IRS's 2026 inflation-adjustment release (IR-2025-103, Oct. 9, 2025), which also raised the health FSA salary-reduction limit to $3,400 and the qualified transportation fringe benefit to $340/month.
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Employer childcare tax credit jumps to $500K for 2026
Why this matters for founders
If you already provide or subsidize childcare for employees, your potential credit more than tripled — a real lever for retention if your team has working parents. Even small employers can now claim up to $600,000, so it may be worth modeling a childcare benefit as a tax-advantaged perk rather than a straight cost. Loop in your accountant before year-end to structure qualifying expenses correctly.
Source: Internal Revenue Service (newsroom)
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