Elevating youngsters or caring for a dependent isn’t low cost — particularly whenever you’re juggling work or college on high of parenting. However if you happen to pay for childcare so you may work or search for work, you may qualify for a tax credit score. The Little one and Dependent Care Tax Credit score (CDCC) is a federal tax break designed to assist ease the price of look after eligible dependents.
This information breaks down every little thing you should know concerning the daycare tax credit score, together with eligibility standards, qualifying bills, the best way to calculate your credit score quantity, and the best way to declare the credit score in your federal revenue tax return.
At a look:
- The CDCC, additionally typically known as the kid care tax credit score or daycare tax credit score, helps working households offset the price of childcare and different dependent care bills.
- The credit score is price 20% to 35% of your qualifying bills, as much as a most of $3,000 for one dependent or $6,000 for 2 or extra.
- Certified bills might embody daycare bills, day camps, babysitters, and extra.
- To say the credit score, you will need to have earned revenue and pay for care so you may work or search for work.
What’s the Little one and Dependent Care Tax Credit score?
The Little one and Dependent Care Credit score is a nonrefundable tax credit score that helps offset little one care bills (or the price of caring for an additional qualifying particular person) whilst you work or actively search for work. It’s designed to assist working households, whether or not you’re paying for a daycare middle, babysitter, childcare supplier, and even somebody offering look after a disabled partner or ageing mum or dad.
The Little one and Dependent Care Credit score isn’t a tax deduction (which reduces your taxable revenue). It’s a tax credit score, which immediately reduces your tax legal responsibility and lowers the full quantity of federal revenue tax you owe.
Who qualifies for the dependent care credit score?
To qualify for the dependent care credit score, you will need to meet the next eligibility guidelines:
- You (and your partner, if submitting collectively) will need to have earned revenue throughout the tax 12 months.
- You need to have paid the kid care bills so you possibly can work or search for work.
- The care will need to have been supplied for a qualifying particular person (see beneath).
- The quantity you may declare relies on your adjusted gross revenue, or AGI (extra on this later).
If you happen to’re married submitting individually, you usually can not declare this tax credit score until you meet particular IRS exceptions for {couples} who’re legally separated or residing other than their partner.
Who is taken into account a qualifying particular person for the kid care tax credit score?
To satisfy the eligibility necessities for the Little one and Dependent Care Credit score, the particular person receiving care have to be one of many following:
- A qualifying little one (who was below age 13 on the time of care) who lived with you for greater than half the tax 12 months.
- A partner who lived with you for no less than half the 12 months and is bodily or mentally unable to look after themselves.
- One other dependent (like a mum or dad or relative) who lived with you for greater than half the 12 months and is unable to look after themselves.
If the particular person isn’t your dependent attributable to sure exceptions (e.g., they earned greater than $5,050 in 2024, greater than $5,200 in 2025, or filed a joint return), you may nonetheless qualify.
The IRS lays out all the main points and definitions below Who Is a Qualifying Individual? in Publication 503, together with some nuances for youngsters of divorced mother and father and the best way to decide the custodial mum or dad.
Is there an revenue restrict for the kid care tax credit score?
Sure, the share of qualifying bills you may declare is predicated in your adjusted gross revenue (AGI):
| AGI Vary | Share of Qualifying Bills |
| $15,000 or much less | 35% (most allowed) |
| $15,001 to $43,000 | Begins to step by step lower |
| Over $43,000 | 20% (minimal allowed) |
These limits imply higher-income households will nonetheless qualify to assert the credit score, only for a smaller share of their care prices.
What daycare bills are tax-deductible?
Technically, you may’t “deduct” daycare prices, however you might be able to declare them below the Little one and Dependent Care Tax Credit score. Right here’s a breakdown of qualifying bills.
Examples of eligible little one care bills:
- Daycare bills (together with daycare facilities and in-home daycare)
- Charges paid to a babysitter
- Preschool or nursery college (earlier than kindergarten)
- Earlier than- and after-school packages
- Day camps or summer season camps (in a single day camps don’t depend)
- Family providers paid to somebody like a prepare dinner or housekeeper who additionally offers dependent care
- Care funds made to a relative who isn’t your dependent
Keep in mind, the above are solely thought-about qualifying bills if you happen to paid for the kid care so you possibly can both work or look for work. In different phrases, prices paid to a babysitter to look at your little one whilst you exit for the night aren’t an eligible expense. However paying a babysitter to look at your toddler whilst you’re at work could be a certified expense.
Examples of non-eligible bills:
- Kindergarten and up (training isn’t a certified expense)
- In a single day camps
- Summer time college or tutoring
- Little one assist funds
- Funds made to your partner or the mum or dad of the qualifying particular person
- Funds made to your personal little one below age 19 or one other dependent
How a lot is the Little one and Dependent Care Tax Credit score price?
If you happen to and the particular person receiving care meet all eligibility necessities, you may declare as much as:
- $3,000 in bills for one qualifying dependent
- $6,000 for 2 or extra qualifying dependents
Relying in your adjusted gross revenue, you’ll get again between 20% and 35% of these prices.
Instance of the best way to calculate the kid care credit score
Let’s say you’re a single mum or dad who spent $4,000 on childcare to your 2-year-old. Your AGI for the 12 months is $14,000. Based mostly on the revenue limits, you’re eligible for the utmost 35% credit score.
35% of $3,000 (the max for one dependent) = $1,050 most credit score
Now, let’s say you had two youngsters and spent $7,000 on daycare; the utmost quantity you may declare for 2 dependents is $6,000. In case your AGI nonetheless qualifies you for a 35% credit score, that’s a most tax credit score of $2,100.
How employer-provided advantages have an effect on the CDCC
In case your employer gives dependent care advantages, these can depend towards the full quantity of kid and dependent care bills you report back to the Inside Income Service.
What are dependent care advantages?
- Cash your employer pays on to you or your childcare supplier for care whilst you work
- The truthful market worth of care supplied via an employer-sponsored daycare facility
- Pre-tax contributions you make to a dependent care versatile spending account (FSA)
If you happen to obtain any dependent care advantages, you might be able to exclude these advantages out of your revenue when calculating the CDCC.
How a lot are you able to exclude from revenue with dependent care advantages?
There’s a cap on how a lot dependent care advantages you may exclude out of your taxable revenue. The quantity you may exclude relies on just a few various factors, however basically, you’re restricted to the smallest of the next:
- The whole dependent care advantages you acquired throughout the tax 12 months
- The entire quantity of certified bills you paid for care
- Your earned revenue
- Your partner’s earned revenue (if you happen to’re married)
- The utmost allowed by your employer’s dependent care plan
For 2024, that most is $5,000 if you happen to’re single or married submitting collectively, or $2,500 if you happen to’re married submitting individually. Test together with your employer if you happen to’re uncertain whether or not your profit plan qualifies.
Tax Tip: You need to obtain a Kind W-2 out of your employer exhibiting the full quantity of dependent care advantages paid to you in field 10.
How does a dependent care FSA have an effect on the kid care tax credit score?
If you happen to take part in a dependent care FSA via your employer, you’ll want to scale back the bills you declare for the dependent care credit score by the pre-tax cash you paid via your FSA.
For instance, let’s say you contributed $5,000 to your FSA throughout the tax 12 months. You could have two qualifying dependents and an AGI of $45,000, which means you may declare 20% of as much as $6,000 in bills.
$6,000 whole max CDCC for 2 or extra dependents – $5,000 FSA contributions = $1,000 restrict
So, on this case, you may solely declare as much as $1,000 in extra bills for 2 or extra dependents.
$1,000 restrict x 20% (your allowed share primarily based in your AGI) = $200 tax credit score
For extra info on this matter, try the part on Dependent Care Profits in IRS Publication 503.
How you can declare the dependent care tax credit score
To say the Little one and Dependent Care Tax Credit score, you’ll must file IRS Form 2441. You’ll then switch the ultimate credit score quantity to Schedule 3, line 2 in your Kind 1040.
To calculate the credit score, you want the next info:
- Your care supplier’s title, tackle, and taxpayer identification quantity — normally a Social Safety quantity for a person or an employer identification quantity (EIN) for a corporation or group.
- An inventory of the qualifying individuals receiving care.
- The care bills you paid throughout the tax 12 months.
If you happen to’re utilizing TaxAct®, our tax software program will enable you to full the kinds mechanically primarily based in your solutions to our interview questions. We’ll then calculate your tax credit score for you.
To finish Kind 2441 in TaxAct, comply with these steps.
- In your TaxAct return, click on Federal within the left sidebar menu.
- Scroll down. Underneath Miscellaneous Matters, click on Little one and Dependent Care as proven beneath.
- Click on + Add Kind 2441 Care Supplier to create a brand new copy of the shape as proven beneath or click on Edit to edit or replace an present kind.
- Proceed with the interview course of to enter the supplier info and reply any related questions.
- Once you get to the Care Supplier Abstract web page, click on Proceed.
- On the How a lot How a lot did you spend for every dependent’s care? display, click on Begin beside the primary dependent’s title to enter how a lot of the full paid was for that dependent, as proven beneath.
- If not one of the quantity paid to a supplier was for that dependent, verify the Little one is a certified dependent, however didn’t incur bills field and click on Proceed.
- Upon getting added quantities or checked the field for every dependent, click on Proceed to proceed.
- A abstract web page will show the outcomes of the credit score calculation.
- If the credit score isn’t allowed, a motive is proven.
- If the credit score is allowed, the quantity will probably be displayed. The credit score carries to Kind 2441, and Kind 1040, Schedule 3, line 2.
FAQs
Can I declare each the Little one Tax Credit score and the Little one and Dependent Care Credit score?
Sure! You’ll be able to declare the Little one Tax Credit score (CTC) and the kid care tax credit score in the identical tax 12 months, so long as you meet the separate eligibility guidelines for every.
The Little one Tax Credit score is partially refundable and helps scale back your tax invoice primarily based on the variety of qualifying youngsters you’ve gotten, whereas the Little one and Dependent Care Credit score helps with out-of-pocket little one care bills.
What info do I would like from my babysitter?
To say the CDCC, you’ll want the title, tackle, and Social Safety variety of the one who supplied care (you’ll enter this on Kind 2441).
Can I declare the kid care tax credit score as a full-time scholar?
Sure — if you happen to (or your partner) had been a full-time scholar or disabled and unable to look after your self, the IRS might deal with you as having month-to-month earned revenue below these circumstances. See the IRS rules for students or those unable to care for themselves in Publication 503.
Can I declare care supplied by a relative?
Sure, however not if the caregiver is your little one below age 19 or somebody you may declare as a dependent.
Is the Little one and Dependent Care Credit score refundable?
No, this tax credit score is nonrefundable. This implies if the tax credit score quantity exceeds your tax legal responsibility, you received’t be capable to declare the surplus credit score again as a tax refund.
Can I declare the daycare tax credit score if I’m married however file individually?
Generally, no. If you happen to’re married submitting individually, you usually can’t declare the Little one and Dependent Care Tax Credit score until you meet particular exceptions, like residing aside out of your partner for the final six months of the tax 12 months. Test IRS Publication 503 for the complete record of qualifying conditions.
Do I would like receipts?
Sure! When you don’t need to submit receipts together with your tax return, you must completely maintain them together with your information. The IRS might ask for proof of your little one care bills if you happen to’re ever audited, and having receipts readily available can prevent time and stress.
Ensure that your receipts embody the care supplier’s:
- Identify
- Deal with
- Dates of service
- The quantity paid
Can I exploit each a dependent care FSA and this credit score?
Sure, however you may’t “double-dip.” The CDCC is just for out-of-pocket care bills. Any quantity you contribute pre-tax to a dependent care FSA reduces the quantity of bills you may declare for the daycare tax credit score. For instance, if you happen to contribute $5,000 to an FSA, you may solely use as much as $1,000 in extra bills for the credit score (because the max for 2 or extra dependents is $6,000).
What if I’m self-employed?
You continue to qualify for the credit score you probably have earned revenue from self-employment. Simply be sure you observe your revenue and dependent care bills fastidiously. See the IRS rules about self-employment earnings.
The underside line
Paying for childcare or look after a beloved one can take a giant chunk out of your finances — however the Little one and Dependent Care Tax Credit score may help soften the blow. Determining which care bills qualify and the way a lot you may declare may really feel sophisticated, however we may help. TaxAct makes it easy to assert and calculate the kid care tax credit score. Simply reply just a few easy questions, and our tax preparation software program will deal with the maths, tax kinds, and every little thing in between.