What changed
In January 2026, a federal tax credit for employer-provided child care got a major expansion. Companies that help pay for employees' licensed child care now get 40% of that money back from the federal government, and 50% if they're a smaller business. Don't take my word for it: it's on the IRS's own page, and the Bipartisan Policy Center, a nonpartisan think tank, has a plain-English guide. New York adds its own state credit on top. Combined, a New York employer often gets 70% or more back.
What that means in practice
Say a company puts $50,000 a year toward its employees' daycare and preschool bills. After the credits, the real cost to the company can be around $15,000. Employees get the full $50,000 of help. Per dollar of net cost, almost nothing else in a benefits package delivers this much value to working parents.
What kind of care counts
Licensed care: day care centers, preschools, and licensed home-based programs. The employer contracts directly with one or more licensed providers, which can include the provider your family already uses if it's licensed. Nannies and informal babysitting generally don't qualify, and neither does K-12 school.
Does this change my own taxes?
No. This is a credit for your employer, not a personal deduction. The company spends the money and gets most of it back; what you get is an employer that can afford to help, because the true cost to them is a fraction of the sticker price.
Is there a catch?
The program has to be open across the workforce, not just to executives; that's a legal requirement and what makes it fair. The company needs to be profitable enough to owe taxes. And the contracts and paperwork have to be done right. None of these are reasons not to act. They are reasons for companies to use a specialist instead of winging it.
The note to send
Written for whoever owns benefits at your company: HR, the CFO, the office manager, or the owner. Send it as an email, drop it in Slack, or hand over this page. Edit it however you like; it's yours now.
Subject: A tax credit that makes child care benefits unusually cheap
Hi [NAME],
I came across something that seems worth a look from whoever owns benefits. As of January, an expanded federal tax credit reimburses employers 40-50% of what they spend helping employees with licensed child care. That's per the IRS's own page (https://www.irs.gov/businesses/small-businesses-self-employed/employer-provided-child-care-credit-tax-year-2026-and-later); the Bipartisan Policy Center has a good neutral guide (https://bipartisanpolicy.org/explainer/45f-employer-provided-child-care-tax-credit-2026-guide/). New York adds a state credit on top (https://www.tax.ny.gov/pit/credits/employer-provided_childcare_credit.htm), so for NY employers the combined recovery is often around 70%, sometimes more.
I got this from a small New York consultancy that sets these programs up: Arluck Consulting, arluckconsulting.com. They coordinate with the company's own CPA rather than replacing anyone, and they answer questions for free: jake@arluckconsulting.com.
Could this make sense for us? It looks like unusually good math for something that would matter to a lot of us.
[YOUR NAME]
Check the numbers yourself
- The IRS's page on the expanded employer child care creditThe 40% and 50% federal reimbursement numbers, in black and white.
- The Bipartisan Policy Center's 2026 guideA plain-English walkthrough from a nonpartisan think tank.
- New York's page on its employer-provided childcare creditThe state credit that stacks on top of the federal one.
- The two-minute estimatorRough numbers for a company shaped like yours.
Prefer to see numbers sized to your company, or just have a question?
Estimate it for your team