Expanded Child Care Tax Credit Opens New Opportunities for Manufacturers

Starting January 1, 2026, manufacturers will have access to expanded federal tax incentives designed to make workplace child care more affordable. Changes to the 45F tax credit could help address recruitment and retention challenges while reducing absenteeism costs that have plagued the industry.

Tax Credit Increases to 50 Percent of Expenses

The expanded 45F credit will cover 50 percent of qualified child care expenditures, rising to 60 percent for small businesses. Maximum credit amounts will increase to $500,000, or $600,000 for small businesses, according to Manufacturing Dive.

Under current rules, the credit allows businesses to reduce their income tax liability by up to $150,000 annually, covering 25 percent of qualified child care expenses and 10 percent of resource and referral service costs. The 2026 expansion also broadens eligibility to include third-party mediators contracted with child care facilities and jointly owned facilities.

Kimberly Spriggs, partnerships manager at KinderCare, noted that cost remains the most significant barrier for companies considering workplace child care. “What we hear is, ‘Wow, love it. But we can’t really justify the costs at this point,'” Spriggs said. “So with the 45F child care credit now increasing, where the government is going to pay almost half of the cost, the math is going to work now for our companies.”

Child Care Costs Employers $13 Billion Annually

According to a 2024 report by Moms First and Boston Consulting Group, inadequate child care costs employers $13 billion per year in lost productivity. The report analyzed five companies with child care benefits and found returns on investment of up to 425 percent. Additionally, 90 percent of employers reported that child care benefits improved talent recruitment and retention, while 88 percent saw productivity increases.

For manufacturers struggling with workforce challenges, these numbers matter. Replacing a single employee can cost up to twice that worker’s annual salary, and absenteeism directly impacts production schedules and output.

Working parents with access to child care benefits avoided up to 16 days of missed work per year, according to the Moms First report. At a panel discussion during the Women in Manufacturing Summit in October, about three-quarters of attendees raised their hands when asked if they had missed work due to child care issues or felt tension between work and home life when arranging care.

Whirlpool Sees Retention Gains from On-Site Child Care

Whirlpool operates an on-site child care center, The Eddy, at its headquarters in Benton Township, Michigan. The facility, which opened in 2019 in partnership with KinderCare, has achieved measurable improvements in retention.

Sara McLeod, head of global compensation at Whirlpool, said employees who use The Eddy show higher engagement and retention rates. The company frequently hears from talent recruits that the child care center was a deciding factor in accepting job offers.

“They knew that was one less thing that they had to think about when they were relocating to Southwest Michigan, [which] was where their children were going to be and how safe they were going to be,” McLeod said.

The appliance manufacturer often retains employees until their children complete the program at The Eddy. However, Whirlpool operates ten manufacturing facilities across the United States, and the child care center exists only at headquarters. The company continues to lose attendance at other locations due to child care issues and currently offers discounted rates at KinderCare facilities nationwide as an interim solution.

Manufacturing Faces Unique Child Care Challenges

Plant workers face particular challenges accessing child care. Many factories operate multiple shifts that start before and end after typical child care business hours. Finding affordable, accessible care that matches manufacturing schedules remains difficult.

Women comprise approximately 29 percent of the manufacturing workforce, according to a 2022 Deloitte and Manufacturing Institute report. The Manufacturing Institute launched the “35×30” campaign in 2022, aiming to add 500,000 women to the industry by 2030, increasing representation to 35 percent.

Flexible work schedules, competitive income and benefits, and work-life balance were identified as key factors for achieving that goal. Child care benefits address multiple elements of that strategy simultaneously.

Meredith Lipnick, director of private sector strategy at Moms First, emphasized the need for systemic solutions. “If we all work together and uplift these issues, we can really change the conversation from, ‘This is a personal problem for families to solve,’ to ‘This is a systemic issue that the public and private sector can come together to find solutions for,'” Lipnick said.

Plan Now for 2026 Implementation

With the expanded credit taking effect January 1, 2026, manufacturers should begin planning now. KinderCare assesses manufacturing site schedules and surveys employees to determine appropriate operating hours when developing child care plans.

Our team helps manufacturers evaluate tax credit opportunities, assess workforce benefit strategies, and manage implementation costs. Visit our Manufacturing Services page to learn how we support strategic decision-making around tax incentives and employee benefits.

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