In March 2024, Governor Kay Ivey signed HB 358, creating the Alabama Child Care Facility Tax Credit, which supports the expansion, improvement, and operation of child care facilities through tax credits for child care providers.
Alabama child care providers who own and operate a qualified child care facility licensed by the Alabama Department of Human Resources, and who participate in the Quality Rating and Improvement System (Quality STARS) and the Child Care Subsidy Program, are eligible for the tax incentive.
Through the tax credit, a child care provider can receive $1,000 to $2,000 per child who is enrolled and receiving child care assistance, depending on the facility’s quality rating under the Alabama Quality STARS program. An eligible child care provider may receive a credit of up to $25,000 per year, which can be used for income taxes, financial institution excise taxes, insurance premium taxes, or utility license taxes.
The tax credit has an annual aggregate cap of $5 million for all child care providers; 25% of that is reserved for child care facilities that operate exclusively in rural areas. The tax credits went into effect on January 1, 2025, and will end on December 31, 2027, unless the legislature extends them.
Sources:
Women’s Foundation of Alabama. (2024). Alabama Child Care Tax Credits: Understanding the Basics.
Alabama Department of Revenue. (2025). Facility Tax Credit — General Guidelines.
Alabama Department of Revenue. (n.d.). Procedures for Childcare Facility Tax Credit.
Connections to Key Early Learning Study at Harvard (ELS@H) Findings:
High-quality, affordable early education and care supports children’s healthy development and allows families to work, engage in their own educational pursuits, and/or participate in other aspects of community life. To support children and families in these instrumental ways, research suggests there is a need to expand the availability of early education opportunities across the mixed-delivery system.
Findings from the Early Learning Study at Harvard (ELS@H) show:
- Families rely on a range of formal (e.g., Head Start, center-based care, public pre-K) and more informal (e.g., home-based, relative care) early education settings; when choosing a setting for their child, families balance many logistical constraints and personal preferences.
- But for many families – and especially low- and middle-income families – early education choices remain tightly constrained due to issues of affordability and supply.