Introduction to the New Workforce Child Care Tax Credit
The state of Louisiana is making significant strides in supporting working families and businesses with the introduction of the Workforce Child Care Tax Credit, set to take effect in 2026. This new initiative, modernized and renamed from an existing credit, aims to address the critical need for reliable and affordable child care, a key factor in workforce participation and economic growth.
The Impact of Reliable Child Care on Workforce and Economy
Access to dependable child care is essential for Louisiana’s working families and the businesses that rely on them. Without it, parents often face the difficult choice of leaving the workforce, settling for jobs with limited advancement opportunities, or experiencing financial strain. Employers also feel the strain, dealing with increased turnover and higher recruitment and retention costs.
A study by the Louisiana Policy Institute for Children estimated that workforce disruptions due to inadequate child care cost Louisiana employers $762 million annually. Conversely, when working parents miss work, they lose income, leading to decreased consumer spending and an overall annual economic loss of $1.3 billion for the state.
Key Features of the Workforce Child Care Tax Credit
Act 454 of the 2025 Regular Legislative Session introduces several enhancements to the existing tax credit:
- Expanded Business Child Care Tax Credits: The maximum allowable expenses businesses can claim for supporting child care are doubled, including construction, renovation, and operations of child care facilities. The cap increases from $50,000 to $100,000 per tax year.
- Direct Child Care Support for Employees: Businesses can now claim a tax credit for payments made to eligible child care facilities on behalf of their employees. The cap on these payments is raised from $5,000 to $10,000 per child per year.
- Reserved Child Care Slots: Companies can claim up to $100,000 per year (up from $50,000) for purchasing or reserving child care slots for their employees’ children at eligible facilities.
- Support for High-Quality Providers: The tax credit amount businesses can claim when their employees’ children are enrolled in top-rated programs has been increased.
Policy Goals and Expected Outcomes
The primary goal of these enhancements is to encourage more employers to invest in child care solutions for their workforce. By strengthening the link between business investment and child care availability, the new law prioritizes economic growth and family stability.
Reliable child care is crucial for the career advancement of working parents. When parents have access to dependable child care, workforce participation rises, productivity improves, and children benefit from early learning opportunities. This, in turn, helps businesses meet their staffing needs and contributes to the overall economic health of the state.
Application Process and Credit Availability
The Workforce Child Care Tax Credit will be available to businesses who make eligible investments in quality child care in 2026. They can claim the credit on their tax returns beginning in 2027. For the current tax year, the total tax credit available to be claimed is $1 million, with the potential to grow to a maximum of $5 million in future years based on utilization.
Due to this cap, applications for each tax credit will be approved on a first-come, first-served basis. It is crucial for businesses to apply for the credits as early as possible in 2027 to secure their share of the available credits.
The Role of Better Louisiana in Championing the Legislation
Better Louisiana has long been a champion of policies that improve educational outcomes and workforce participation. The new Workforce Child Care Tax Credit reflects a commitment to making Louisiana a more competitive and family-friendly state. By advocating for this legislation, Better Louisiana aims to ensure that more parents can work or advance their careers, businesses can better meet their staffing needs, and more children will have access to the high-quality early childhood education they need to succeed.
Conclusion: A Brighter Future for Louisiana Families and Businesses
The introduction of the Workforce Child Care Tax Credit in Louisiana is a significant step forward in addressing the challenges of child care access and workforce participation. By providing enhanced tax incentives for businesses and direct support for families, the state is fostering an environment where both can thrive. This initiative not only supports the immediate needs of working parents and employers but also invests in the long-term economic health and stability of Louisiana.
