State & Employee Tax Benefits
Arkansas Tax Credits
Employer-Provided Child Care Credits
Section 26-51-507
A business that qualifies for an exemption from the gross receipts tax is allowed a tax credit of 3.9% of the annual salary of employees employed exclusively in providing child care services. If two or more businesses participate in a child care program for their employees, then each business is allowed an income tax credit of 3.9% of the annual salary of only those employees who are on the respective business’ payroll and are employed exclusively for providing child care services. Learn more under Section 26-51-507.
Section 26-51-508
A business that qualifies for a refund of the gross receipts tax or compensating use tax is allowed a tax credit of 3.9% of the annual salary of its employees employed exclusively in providing child care services or a $5,000 tax credit for the first tax year the business provides its employees with a child care facility. If two or more businesses participate in a child care program for their employees, then each business is allowed a tax credit of 3.9% of the annual salary of only those employees who are on the respective business’ payroll and are employed exclusively for providing child care services. The first year’s $5,000 credit will be prorated among the businesses based on the percentage of the cost paid by each business for the initial construction and equipping of the child care facility. Learn more under Section 26-51-508.
Refund for Construction of Employer-Operated Child Care Program
Section 26-52-516
A business that operates, or contracts for the operation of, a child care facility for the primary purpose of providing child care services to its employees may obtain a refund of the gross receipts tax paid on the purchase of construction materials and furnishings after the facility is licensed. Learn more under Section 26-52-516.
Section 26-53-132
A business that operates, or contracts for the operation of, a child care facility for the primary purpose of providing child care services to its employees may obtain a refund of the compensating use tax paid on the purchase of construction materials and furnishings after the facility is licensed. Learn more under Section 26-53-132.
Federal & State Employee-based Options
Federal Tax-Free Payments for Child Care
Businesses can set up Dependent Care Assistance Plans (DCAPs), which are flexible spending accounts, that enable employees to set aside up to $5,000 per year in pre-tax salary for child care expenses.
Federal Child and Dependent Care Tax Credit (CDCTC)
When employers send employees their W-2 at tax time, remind them if they have children for whom they pay for child care services, employees can claim the CDCTC.
Arkansas Parent Child Care Tax Credit
For parents who utilize the federal CDCTC, Arkansas allows parents a tax credit of 20% of the amount claimed on their federal tax return. The state tax credit for parents is refundable.
Learn more Here
Resource One-Pagers
Contact Arkansas Child Care Aware
Arkansas Child Care Resource & Referral (CCR&R) agencies are located in five regions to help parents find child care and to support child care providers in offering high-quality child care. A referral specialist will help parents identify child care options based on family specific needs. Contact your regional Child Care Aware organization today!