New tax credits aim to improve child care options and support workforce growth in Alabama

A new child care tax credit has gone into effect across the state. In March, employers and child care providers can claim the credit for the upcoming tax season.

The credit is expected to have a tremendous benefit for the workforce by expanding child care options for families across the state. Many providers have had to close their doors, reduce their hours or reduce their staff following the pandemic.

“If kids don’t come, we don’t have a lot of money to pay our staff,” said Braelyn Mack of Tiny Toes Daycare in Birmingham. “We had to cut working hours. We had to withdraw from various accounts just to make sure our employees were taken care of.”

Under the new law, child care providers can apply for up to $25,000 each year to improve the quality of child care in their facility. A nonprofit daycare center can apply for up to $50,000.

Employers can also apply for the loan. Anyone can be reimbursed up to $600,000 for costs related to the construction and maintenance of in-house child care facilities. This employer could also choose to pay for outside childcare for employees earning less than $80,000 per year.

This is expected to help increase workforce participation.

“We know that families can spend more than 20-30% of their income on child care alone,” said Joan Wright of Childcare Resources, a particular company that participates.”

The tax credit is valid for the next three years and has at least $15 million in available funds each year. Wright said it is imperative that employers and providers utilize these funds each year so that an extension of the program can be considered.

“The hope is that there will be enough participation, demands and positive outcomes (of the tax credit) over these three years,” Wright said. “People entering the workforce are returning to the workforce and seeing those rates go up. To see.” These efforts will empower child care providers a little more so that the public will come back to the Alabama legislature and say we need this not just in terms of time but also in terms of financial limitations.

Employers and providers can begin applying for the funds on March 1. Wright recommends parents ask their employer if they plan to apply for the loan.

The Alabama Department of Revenue awards the facility tax credit on a first-come, first-served basis. 25 percent of the total available credits will be reserved for child care facilities operating exclusively in rural areas.