What is the Employer Tax Credit?
The Employer Tax Credit (Act 2024-303) is a state incentive effective January 1, 2025, through December 31, 2027, for Alabama employers who pay for employees' childcare or incur eligible expenses for the operation, maintenance, or updates of a qualified childcare facility. The Alabama Department of Revenue administers the credit; email incentives@revenue.alabama.gov with questions.
Eligible employers are forprofit businesses in Alabama that support childcaregiving priority to employees who qualify for the federal Earned Income Tax Credit. The credit equals a percentage of eligible expenses for childcare services for children age five or younger and must be claimed in the tax year the expenses are incurred.
The credit may be applied against Alabama income tax, the state portion of the financial institution excise tax, the insurance premium tax, or the Utility License Tax (for utilities). It is nonrefundable for all employers except qualifying childcare providers, which may receive a refund if the credit exceeds their tax liability. Passthrough entities may pass the credit to owners on a pro rata basis. To claim the credit, taxpayers must first reserve it through My Alabama Taxes and then submit a supporting credit claim at year end; only those with a reservation may file a claim.
Eligible employers are forprofit businesses in Alabama that support childcaregiving priority to employees who qualify for the federal Earned Income Tax Credit. The credit equals a percentage of eligible expenses for childcare services for children age five or younger and must be claimed in the tax year the expenses are incurred.
The credit may be applied against Alabama income tax, the state portion of the financial institution excise tax, the insurance premium tax, or the Utility License Tax (for utilities). It is nonrefundable for all employers except qualifying childcare providers, which may receive a refund if the credit exceeds their tax liability. Passthrough entities may pass the credit to owners on a pro rata basis. To claim the credit, taxpayers must first reserve it through My Alabama Taxes and then submit a supporting credit claim at year end; only those with a reservation may file a claim.
