Active 2026 Tax Credit
Arkansas Employer Child Care Tax Credit
Arkansas Act 1435 provides employers up to$500,000/yearin child care tax credits — one of the most competitive tax stacks in the South.
2026
Program Year
Active
Program Status
45F
Federal Credit Available
All
Employers Eligible
⚖️ How the Cost Split Works
Employer Pays
~33%
of total tuition
Arkansas Pays
~33%
state match
Parent Pays
~33%
of total tuition
📊 The Arkansas Savings Stack
Stack available Arkansas programs with the Federal 45F Tax Credit for maximum employer savings.
| Benefit Layer | Small Business (<$32M) | Large Business |
|---|---|---|
| State Program Benefit | Varies by program | Varies by program |
| Federal 45F Credit (2026) | 50% Tax Credit | 40% Tax Credit |
| Net Employer Cost | Significantly Reduced | Significantly Reduced |
💰 Real-World Employer Savings
| Cost Component | Without Program | With State + 45F Stack |
|---|---|---|
| Annual child care cost (per employee) | $12,000 | $12,000 |
| State Program Benefit | $0 | Varies |
| Employee Share | $0 | Reduced |
| Employer Share | $12,000 | Reduced |
| Federal 45F Credit (50% of employer share) | $0 | Significant savings |
| Net Employer Cost | $12,000 | Significantly Lower |
📋 All Available Programs
Federal 45F Tax Credit
Federal Tax Credit
Up to $600,000/year
All U.S. employers
Duo-Share Program
Employer-Employee Split
Flexible cost sharing
All employers — no state required
📍 Geographic Coverage
Major Cities Served
County Coverage
All 75 Arkansas counties are eligible for the Act 1435 employer tax credit. Contact the Arkansas Division of Child Care and Early Childhood Education for details.
❓ Frequently Asked Questions
Arkansas uses a robust tax credit model (Act 1435) rather than a traditional tri-share grant. This allows employers to claim up to $500,000 per year in state tax credits for child care expenses. When stacked with the Federal 45F Credit and DCAP matching, it creates a multi-party cost-sharing structure where the employer pays upfront and the state and federal government reimburse through credits.
Act 1435 established a statewide employer child care tax credit with a$15 million annual cap. Employers can claim credits for direct payments to licensed child care facilities, DCAP matching contributions ($2,500 per employee), and facility construction or renovation costs. Individual employers are capped at $500,000 per year.
Yes. Unlike older laws, Act 1435 allows employers to claim the credit fordirect paymentsmade to a licensed facility to reserve or provide seats for their employees' children. This is a significant improvement that simplifies administration and ensures funds go directly to care.
Yes. Arkansas has set aside$3.75 million(25% of the total credit pool) specifically for rural employers in cities with populations under 25,000. This ensures rural communities — where child care deserts are most severe — have dedicated access to credits even as larger metro employers apply.
Yes. Arkansas employers can stack the state Act 1435 credit with the Federal Section 45F Credit (up to 50% for small businesses, max $600,000/year) and DCAP matching credits ($2,500 per employee). This "triple stack" can reduce a $5,000 annual stipend to roughly $1,200 net cost for a Little Rock employer — a 76% savings.
Arkansas currently has a waitlist of over1,100 childrenfor state child care vouchers. Employer-funded child care through Act 1435 credits provides a direct pathway for working families to access care without waiting for state voucher availability. This makes employer-sponsored programs even more critical.
Yes. While Arkansas reimbursement rates are streamlined statewide,Benton and Washington Counties(Northwest Arkansas — home to Walmart, Tyson, and J.B. Hunt headquarters) receive a higher market rate to reflect the increased cost of care in those economic hubs.
📚 References & Sources
Last Updated: March 1, 2026
📋 Available Programs & Incentives
Arkansas Employer Child Care Tax Credit (Act 1435)
State Tax Credit
30% of employer contributions (up to $3,600/child/yr)
Eligibility: All Arkansas employers with qualifying child care expenses
Federal Section 45F Credit
Federal Tax Credit
Up to 50% of employer costs (max $600K/yr)
Eligibility: All U.S. employers with qualifying child care expenses
Arkansas Child Care Assistance Program (CCAP)
State Subsidy
Sliding-scale co-pay based on income
Eligibility: Families at or below 85% SMI
Arkansas Better Chance (ABC) Pre-K
State Program
Free pre-K for eligible 3-4 year olds
Eligibility: Families at or below 200% FPL
Duo-Share (Employer + Employee)
Employer Benefit
Flexible split — employer covers 25–75%
Eligibility: Any Arkansas employer, no state program required
❓ Frequently Asked Questions
Act 1435 created a 30% employer tax credit on contributions toward employee child care costs, up to $3,600 per child per year. The credit applies to contributions for employees earning below a set income threshold.
Yes — Arkansas employers can stack the Act 1435 state credit (30%) with the Federal Section 45F Credit (up to 50%). Together, these credits can offset 80% or more of employer child care contributions.
Little Rock, Fayetteville, Fort Smith, and Bentonville have the highest employer participation rates. The credit is available statewide to all Arkansas employers.
Arkansas does not have a formal Tri-Share program. However, the Act 1435 tax credit creates a similar financial incentive. We recommend a Duo-Share model for Arkansas employers — contact us for a free consultation.
The Arkansas Child Care Assistance Program (CCAP) serves families at or below 85% of the State Median Income (SMI). Contact Arkansas DHS for current income thresholds.
File Form AR-1000TC with your Arkansas state income tax return. Contact the Arkansas Department of Finance and Administration (DFA) at dfa.arkansas.gov for guidance.
ABC is Arkansas's state-funded pre-K program for 3 and 4-year-olds from families at or below 200% FPL. It operates in public schools and licensed child care centers statewide.