In a win for both businesses and their employees — the One Big Beautiful Bill Act (OBBBA) incentivizes and facilitates businesses in providing childcare benefits to their employees by making favorable changes to the Employer Provided Child Care Credit (EPCCC). The EPCCC offers employers a tax credit for a portion of the qualified childcare expenditures they pay to provide employees childcare services.
Updates to the EPCCC effective as of January 1, 2026 include:
Increase in the Maximum Credit Allowed for Qualified Childcare Expenses
Businesses have been historically limited to a credit of 25% of their qualified childcare expenses with the maximum allowable annual credit of $150,000. The OBBBA is increasing this credit to 40% of qualified childcare expenses with a new maximum allowable annual credit cap of $500,000.
New Benefits for Eligible Small Businesses
The OBBBA is now allowing eligible small businesses to receive a credit of 50% of their qualified childcare expenses with the maximum allowable annual credit of $600,000. An eligible small business must have less than $31 million in average annual gross receipts over its prior five tax years. This amount will be adjusted for inflation annually.
Eligible small businesses are now also able to pool resources to provide childcare benefits.
Eligibility of Expenses for Third Party Services
The OBBBA enables businesses to now include payments made to third-party intermediaries as qualified childcare expenses.
Our NCA tax professionals are available to explore how this new law change may best benefit you. Please give us a call or send us an email if you would like to schedule a time to discuss.