Changes in Back-up Care Tax implications 

UCSC’s Back-up Care Program helps all UCSC students and employees access subsidized in-home and center-based dependent care. However, since the care is provided at a cost less than the market rate for these services, the difference between the market rate and the benefit user’s cost is treated by the IRS as additional income (also known as imputed income for employees or miscellaneous income for students) and is taxable.  

Since the introduction of the UCSC Back-up Care Program , and because the U.S. President had enacted a federal state of emergency due to the COVID Pandemic, the Stafford Act enabled the Back-up Care Program to be treated as non-taxable, as it qualified as disaster relief during this period.  

However, the federal state of emergency ends on May 11, 2023, and the Stafford Act will be terminated; therefore, the employee or student who uses the Back-up Care Program will be required to pay taxes on the imputed or miscellaneous income corresponding to the hours of care used. 

Please see Tax Implications for the Back-up Care Program for examples of imputed and miscellaneous income calculations.  

For questions regarding tax implications please email All other questions should be directed to Bright Horizons at 877-BH-CARES.