Employee Child Care Tax Savings
Employee Child Care Tax Savings
Tax-Free Payments for Child Care
Employers 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 earnings for child care expenses.
Federal Child and Dependent Care Tax Credit (CDCTC)
When you send your employees their W-2 at tax time, remind them if they have children for whom they pay for child care services, they are able to claim the CDCTC.
NJ Child and Dependent Care Tax Credit
For NJ families with income of $150,000 or less, there is a NJ child care tax credit that is a percentage of the taxpayer’s federal child and dependent care credit. The credit varies according to the amount of the taxpayer’s New Jersey taxable income. For more information, see the NJ Division of Taxation web site.
Learn More
- Employee Child Care Tax Incentives (A one page summary)
- IRS Publication 503, Child and Dependent Care Expenses
- IRS Instructions to fill out Form 2441, Child and Dependent Care Expenses
- IRS Brief Description of the Child and Dependent Care Tax Credit and FAQs
- New Jersey Child Care Tax Credit