Florida has introduced a new tax credit initiative (p111) aimed at assisting businesses that help cover the costs of childcare for their employees, effective for the 2024-2025 fiscal year. This move is designed to alleviate the financial burden of childcare, enabling more parents to participate fully in the workforce.
Here’s a detailed look at what this new tax credit entails and the potential benefit to businesses in Florida.
Understanding the new tax credit for childcare costs
Eligibility and credit amounts
The tax package offers multiple avenues for businesses to earn tax credits based on their support for employee childcare:
- Startup costs for childcare facilities
- Businesses can claim a tax credit of 50% of the startup costs for operating an eligible childcare facility for their employees.
- The maximum credit varies by the size of the business:
- For businesses with 1-19 employees, the maximum credit is $1 million.
- For businesses with 20-250 employees, the maximum credit is $500,000.
- For businesses with more than 250 employees, the maximum credit is $250,000.
- Monthly childcare enrollment credit
- Businesses can claim a tax credit of $300 per month for each eligible child enrolled in the facility.
- The maximum credit amount is also based on the size of the business:
- For businesses with 1-19 employees, the maximum credit is $50,000.
- For businesses with 20-250 employees, the maximum credit is $500,000.
- For businesses with more than 250 employees, the maximum credit is $1 million.
- Direct payments for childcare
- Businesses making payments directly to an eligible childcare facility for the benefit of an employee’s child can claim a tax credit of 100% of these payments, up to $3,600 per child per year.
- The maximum credit amount follows the same structure:
- For businesses with 1-19 employees, the maximum credit is $50,000.
- For businesses with 20-250 employees, the maximum credit is $500,000.
- For businesses with more than 250 employees, the maximum credit is $1 million.
Cumulative credit limits
Businesses may qualify for credits under more than one of the aforementioned categories. However, the total credit taken by any taxpayer in a single taxable year cannot exceed the sum total of the maximum credits granted under each applicable category.
Carryforward provision
If the full amount of the credit is not utilized within the specified fiscal year due to insufficient tax liability, the unused amount may be carried forward for up to five years. This provision ensures that businesses can still benefit from the tax credits even if they cannot use the entire amount immediately.
Childcare tax credit benefits for businesses
Businesses participating in this program stand to gain several advantages:
- Tax Savings: The primary benefit is the reduction in state tax liability, allowing businesses to save money while supporting their employees.
- Employee retention and satisfaction: Helping employees manage their childcare expenses can improve job satisfaction and retention. Employees who feel supported in balancing their work and personal lives are more likely to remain loyal and productive.
- Attracting talent: Offering childcare assistance can make businesses more attractive to potential employees, particularly in a competitive job market.
How businesses can get the childcare tax credit
Businesses can begin applying for these tax credits on October 1, 2024. To take advantage of this tax credit, businesses should:
- Consult a tax professional: Understand the specific requirements and benefits of the tax credit.
- Develop a childcare assistance program: Set up a system for providing childcare assistance to employees, which can include direct payments to childcare providers or reimbursement plans.
- Maintain accurate records: Keep detailed records of all childcare assistance provided to claim the tax credit properly.
- Communicate with employees: Inform employees about the available childcare assistance and how they can benefit from it.
Take advantage of Florida’s new childcare tax credit for businesses
Florida’s new tax credit for businesses that support employee childcare costs can be a significant advantage for employers that want to offer childcare benefits to their employees. By providing financial relief for childcare expenses, this initiative benefits both employers and employees, promoting greater workforce participation and enhancing overall economic well-being. For more information, schedule a consultation to learn how your business can take advantage of this new childcare tax credit.