Child Care Facility Tax Incentive

Arkansas offers a tax incentive for businesses that provide childcare for their employees.

A business may choose between two state income tax credit options: 1) a credit of 3.9% of the total annual payroll of the employees working in the childcare facility, or 2) a one-time $5,000 state income tax credit for the first year. The income tax credit may be carried forward for two years or until used entirely, whichever occurs first.

In addition to either option, businesses may receive a refund on sales and use taxes on construction materials and furnishings purchased to equip an approved childcare facility.

To qualify for these incentives, the business must be approved to operate an early childcare program.* The business may choose to operate the facility or contract the operations.

*Eligibility is determined by the Arkansas Department of Human Services, Division of Child Care and Early Childhood Education.