Clara’s Little Lambs Preschool Academy in New Orleans
Across all industries, Louisiana businesses can invest in their employees’ child care, thanks to the expansion of a state program.
The Workforce Child Care Tax Credit restructures the state’s existing tax credits to widen the caps on expenses both child care and nonchild care businesses alike can claim for supporting childhood education. The program, formerly titled the School Readiness Tax Credit, provides a partially refundable credit for families, child care providers and businesses for contributions to child care in various forms including child care center construction costs and payments for child care on behalf of a company’s employees.
Legislators have doubled the limit for refundable expenses which include child care center construction or repair related expenses, payments from businesses to child care centers on behalf of employees and payments employers make to reserve spots at child care centers for employees.
The changes became effective this year, and families and businesses must apply by Feb. 28 to claim the credit on next year’s tax returns.
The Louisiana Department of Revenue placed a $1 million overall cap for the credits granted in 2026 and will increase the limit in following years depending on the usage of the programs.
Barry Erwin, chief policy officer for Leaders for a Better Louisiana, a statewide nonprofit that backed the legislation, said child care providers used the program’s provisions for the building or renovation of child care centers in the tax credits’ previous iterations, but employers had not taken advantage of the available credits. With the program’s expansion, he’s hoping more businesses will invest in child care for their staff.
“By enhancing the credit, we’ll be able to get that out to employers in a lot more effective way,” Erwin said. “Particularly now, I think they are paying a lot more attention than they were maybe almost 20 years ago.”
Workforce development
The tax credit package was originally passed in 2007 to incentivize usage of early childhood education centers and the state’s quality rating system. Only 27% of 4-year-olds in Louisiana accessed public child care in the early 2000s, according to a report by Louisiana Policy Institute for Children, which advocated for the tax credits. In the late 1990s, 61% of children under age 4 were enrolled in child care, according to the report.
Erwin said the pressures of recruiting and retaining a workforce have mounted, causing state leaders to reexamine how to alleviate the pressure. Child care has become an increasingly consequential factor, he said.
Child care for a 4-year-old costs an average of $8,153 each year in Louisiana, according to 2025 data from the Economic Policy Institute. That’s 9.7% of the median family income — the U.S. Department of Health and Human Services’ considers a maximum of 7% of the family income spent on child care as the affordability standard.
The labor force participation rate of individuals age 16 and up is 58.1% in Louisiana, lower than the national rate of 62.5%, according to Federal Reserve Bank of St. Louis’ September data. Erwin said he thinks child care costs are a factor in the lower-than-average labor force participation rate.
“It’s just become more of an acute issue for a lot of families and employers are feeling it,” Erwin said.
Taking advantage of the credit
The School Readiness Tax Credit program gave a 100% refundable credit for up to $5,000 to businesses who donated to a child care resource and referral agency. Sonjia Brown-Joseph, executive director of Clara’s Little Lambs Preschool Academy, said her New Orleans child care center used the tax credits for the past three to four years.
Brown-Joseph said the center used the funds to give raises and bonuses to teachers and to pay for quarterly trainings for her staff of 40 to stay on top of best child care practices. The tax credits have not been fully taken advantage of in its previous iterations, she said, but now that the state has expanded the program’s limits, she plans to reach out to local businesses to let them know how they can contribute to their employee’s child care.
She said the preschool now has a long waitlist and she’s felt an increased demand for the center’s services after the pandemic when parents returned to work. People are starting to increasingly value early childhood education and its impact on the workforce, she said.
“For years, we were regarded as babysitters, and now we are understanding about brain development and the first five years of how important that is to a child’s life and their future development,” Brown-Joseph said. “And I think everybody’s kind of getting that message now.”
‘Not a giveaway’
Over the past decade, early childhood education matching funds have developed throughout the state to stir investment in child care.
In Alexandria, the Rapides Early Childhood Network has bestowed early learning scholarships for children in central Louisiana for the past two years, amounting to about $9.5 million in investment, according to Patrick Moore, chair of the Rotary Club of Alexandria’s Early Childhood Education Initiative who has worked to raise funds for child care.
A recent study conducted by LSU Alexandria on about 200 recipient families found that more than half of parents were able to return to work due to the funds, and a majority said they’d be unable to work without it.
“We’ve got to make sure that we’re a great place to raise a family,” Moore said.
Moore said the matching program helps entice businesses to contribute by offering funds in return for their investment. Businesses can combine the state’s offerings for child care assistance, like the tax credits and the matching funds, to boost quality child care and help parents reenter the workforce.
“It’s not a giveaway,” he said. “People have to stop and think and invest.”
