What Is the Child and Dependent Care Credit?

The child an❀d dependent care credit is a tax credit offered to taxpayers who pay out-of-pocket expenses for childcare. The credit provides relief to individuals and spouses who pay for the care of a qualifying child or disabled dependent while working or looking for work.

The percentage of eligible expenses that qualify for the tax credit varies depending on the taxpayer’s income level, and the total dollar amount of costs.

Qualifying Person

Taxpayers may claim the child and dependent care credit if they paid someone to care for a "澳洲幸运5官方开奖结果体彩网:qualifying person" so they could work or look for work. According to the 澳洲幸运5官方开奖结果体彩网:Internal Revenue Service (IRS), a qualifying person for the credit is:

• A dependent child who was under age 13 when they received care; or
• A spouse who is physically or mentally incapable of self-care and resided with the taxpayer for more than half of the year; or
• Someone who is physically or mentally incapable of self-care lived with the taxpayer for more than half of the year, and either (1) was a dependent, or (2) could have been a dependent except they received $4,700 (the latest 2023 figure) or more in 澳洲幸运5官方开奖结果体彩网:gross income, filed a joint return, or the taxpayer or spouse, if filing jointly, could have been claimed as a dependent on someone else's tax return.

Allowable Expenses

The IRS allows a fairly wide range of expenses, 🥂including those for:

• Daycare
• Babysitters, as well as housekeepers who take care of the child
• Day camps and summer camps (overnight camps are not eligible)
• Before- and after-school programs
• Nurses and aides who provide care for a dependent who is disabled
• Nursery school or preschool

While working parents can claim educational expenses at the pre-K level, costs related to kindergarten and above do not qualify. Costs for summer school or tutoring are not eligible for the credit.

How to Claim

To claim the credit, taxpayers must have earned income through employment and paid for the care so they can work or search for work. Married spouses must file a joint return to claim the credit or show they meet special requirements listed in IRS Instructions for Form 2441.

Taxpayers complete Form 2441 along with their 澳洲幸运5官方开奖结果体彩网:Form 1040 and the valid 澳洲幸运5ꦺ官方开奖结果体彩网:taxpayer identification numb✱er (TIN) for each qualifying person. They must identify people and organizations that provided care for a child, spouse, or dependent including their names and addresses.

Unlike 澳洲幸运5官方开奖结果体彩网:deductions, tax credits represent a dollar-for-dollar reduction in one’s 澳洲幸运5官方开奖结果体彩网:tax liability. The credit equals a percentage of work-related expenses you paid someone to care for your child or another qualifying person. The percentages range from 20% to 35% of allowable costs depending on 澳洲幸运5官方开奖结果体彩网:earned income and 澳洲幸运5官方开奖结果体彩网:adjusted gross income (AGI).

Custodial Parent or Caregiver

There are special rules for 澳洲幸运5官方开奖结果体彩网:divorced parents. The custodial parent is eligible to take the child and dependent care credit, whether or not the other parent claims the child or children as a dependent on their tax return. According to the IRS, the custodial parent is the one who had the child the most nights in the tax year. If both parents shared an equal number of nights, the parent with the higher AGI applies for the credit.

Except under limited circumstances, the caregiver may not be a member of the immediate family. Specifically, the person providing care can't be a spouse or the parent of a child under the age of 13 whose care is paid for—nor can it be a child under the age of 19 or a dependent for tax purposes.

Child and Dependeꦜnt Care Credit vs. Flexible Spending꧋ Account

Taxpayers may not use the child and dependent care credit for expenses reimbursed by their employer or paid with pretax dollars, including funds in a 澳洲幸运5官方开奖结果体彩网:flexible spending account (FSA). Using an FSA provides a la༺rger tax benefit. That’s particularly true for those in higher tax brackets, for whom the ability to pay with pretax dollars represents bigger tax savings♓.

For the tax year 2025, employees can contribute to FSAs up to $3,300, increasing from $3,200 in 2024. For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount rises to $660, increasing from $640 in tax year 2024. Money in these FSAs is withheld from a paycheck on a pretax basis and placed into a non-interest-bearing account that can be used for eligible expenses.

The Bottom Line

The child and dependent care credit is a tax credit offered to those who pay for childcare. The credit helps individuals and spouses reduce the expense of caring for a qualifying child or disabled dependent while working or looking for work.