Pennsylvania’s Employer Child Care Contribution Tax Credit Program

The Pennsylvania state government offers employers a tax credit when they make contributions towards their employee’s childcare, ensuring that workers receive cheaper childcare supported by both their employers and the state.

Pennsylvania faced a critical shortage of affordable, high-quality childcare, which directly impacted the state’s workforce and business productivity. According to the Pennsylvania Early Learning Investment Commission, nearly 60 percent of the state’s children under age five need care while their parents work, yet more than half of Pennsylvanians live in a “childcare desert.” The U.S. Chamber of Commerce Foundation reports that Pennsylvania loses an estimated $3.47 billion annually in economic activity due to childcare-related workforce disruptions. Without strategic investment and policy solutions, businesses across the Commonwealth continued to struggle with employee absenteeism, retention challenges, and reduced economic growth.

The Pennsylvania Department of Revenue introduced the Employer Child Care Contribution Tax Credit Program, providing a financial incentive for Pennsylvania businesses to help their employees cover childcare costs directly. The core solution allows employers to claim a non-refundable state tax credit equal to 30% of the funds they contribute towards an employee's eligible childcare expenses, with a maximum credit of $150 per employee (based on a $500 annual contribution limit). This direct financial support encourages businesses to become active partners in making care more affordable. By reducing the employer's tax liability, the program offsets the cost of offering this benefit, making it a viable and attractive strategy for businesses to improve employee recruitment and retention while increasing access to quality, certified childcare providers across the state.

~4-9 months