Employee Tax Benefits
Employee-based Child Care Options
Tax-Free Payments for Child Care
Businesses can set up Dependent Care Assistance Plans (DCAPs), which are flexible spending accounts, that enable employees to set aside up to $7,500 per year in pre-tax salary for child care expenses.
Federal Child and Dependent Care Tax Credit (CDCTC)
When employers send employees their W-2 at tax time, remind them if they have children for whom they pay for child care services, they are able to claim CDCTC.
VA Parent Child Care Expense Deduction
Virginia law allows a tax deduction for dependent care expenses based on expenses claimed under the federal child and dependent care tax credit (CDCTC). Families may only claim this deduction on their Virginia tax return if they were eligible to claim a credit for child and dependent care expenses on their federal return.
Learn more here
Employee Child Care Assistance Pilot Program
For FY2027 (beginning July 1, 2026), the Virginia state budget includes $25 million for the Employee Child Care Assistance Pilot Program. The concept is a public-private partnership where employers help make child care more affordable for employees by contributing to the price of care, the state provides a match for some or a portion of that contribution, and the family pays a portion. The pilot will be administered by the Virginia Early Childhood Foundation. Specific rules have not yet been issued, but the legislation says,
- Employees are eligible if household income is at or below 100% of state median income (as adjusted by family size);
- Family co-payments are not to exceed 5 percent of household income for households with income at or below 300 percent of the federal poverty level and between 5 percent and 7 percent of family income for households with incomes between 85 percent and 100 percent of the state median income;
- The state match does not exceed 40 percent of the cost of the slot remaining after application of family co-payments.
Child care providers are eligible to participate if the child care center or family child care home has been selected or identified to deliver mixed delivery services through a local agreement. For additional information, see the state budget conference report agreement.
Contact Child Care Aware of Virginia
Child Care Aware of Virginia offers free, personalized assistance to help parents find child care. Parents can search Child Care Aware of Virginia’s online database or contact Child Care Aware of Virginia’s Referral Specialist at 866-KIDS-TLC or Kay@vachildcare.com. Expert staff can help parents identify child care options based on family specific needs.