Alabama Child Care Tax Credit
On May 9, 2024 Governor Kay Ivey signed into law HB 358 that provides incentives to employers and child care providers that would help address one of the most pressing issues for working parents – accessible and affordable child care. During the first six months of 2023, on average working parents missed 46 hours of work due to issues with child care. One of the biggest issues in child care was a shortage of teachers causing child care providers to operate at less than 100% capacity. In fact most center based care was operating at 72% of capacity making access to care difficult. Care for infants and toddlers was even more difficult causing some parents to have to drop out of the workforce to care for their newborn or rely on family members to help out. Read more about child care in Alabama in our report “Child Care in Alabama: A Roadmap to Support Alabama’s Parents, Children, Employers and Economy”.
HB358 provides incentives in the way of tax credits for employers and providers. This bill, which went into effect on January 1, 2025, provides tax credits to support an employers efforts to provide child care benefits to their employees and for providers to provide tax credits based on their quality rating (QRIS) and the number of young children under 6 years of age that are on subsidized care. For an overview of what the bill does, the Women’s Foundation of Alabama has put together a document Alabama Child Care Tax Credits – Understanding the Basics.
Our thanks to Governor Ivey, bill sponsors Rep. Anthony Daniels and Sen. Garlan Gudger, and the many organizations that took the lead in working on this legislation for the past two years – Manufacture Alabama, Women’s Foundation of Alabama, Business Council of Alabama, and National Federation of Independent Business. VOICES was proud to support this bill and promote this legislation. While tax credits won’t solve all the problems with our child care industry, it is a great start.
Note: This page is intended as a resource but you should refer to the Alabama Department of Revenue for final instructions regarding these tax credits.
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Examples of How to Calculate the Child Care Tax Credit
In order to participate in this tax credit, you must reserve your tax credit with the
Alabama Department of Revenue beginning March 1, 2025.
Alabama Department of Revenue:
– Child Care Facility Tax Credit
– Procedures for Child Care Facility Tax Credit
– Employer Child Care Tax Credit
– Procedures for Employer Child Care Tax Credit
Any questions pertaining to these tax credits can be sent to the Alabama Department of Revenue at [email protected].
VOICES for Alabama’s Children gratefully acknowledges the financial support provided by the Women’s Foundation of Alabama to host and promote the Child Care Tax Credit Act 2024-303.