Background

The Child and Dependent Care Credit is a federal tax credit that offsets work-related care costs for qualifying individuals. The credit was temporarily expanded for tax year 2021 under the American Rescue Plan; for tax years after 2021 it reverted to the familiar rules used before 2021. For current IRS guidance, see the IRS Child and Dependent Care Credit page (IRS).

Who qualifies

  • Qualifying person: a child under age 13 when the care was provided, or a spouse or dependent of any age who is physically or mentally incapable of self-care. (IRS)
  • Taxpayer requirements: you (and your spouse, if filing jointly) must have earned income during the period the care was provided. An exception applies if one spouse was a full‑time student or incapable of self-care.
  • Work-related care: expenses must enable you to work or look for work. Overnight camps and tuition for kindergarten or higher grades generally do not qualify.

How the credit is calculated (key limits)

  • Eligible expenses: up to $3,000 for one qualifying person, or $6,000 for two or more. You cannot claim a credit on amounts above these caps.
  • Percentage: the credit equals a percentage of eligible expenses. The rate is income‑based and ranges from 20% to 35% (lower percentages apply as adjusted gross income rises). See the IRS for current phase‑out tables. (IRS)
  • Practical maximums: under the standard rules, the maximum credit a taxpayer can receive is 35% of $3,000 ($1,050) for one qualifying person or 35% of $6,000 ($2,100) for two or more — but most higher‑income filers receive a lower percentage, so their credit will be smaller.

Example

If you have $6,000 in eligible expenses for two qualifying children and your applicable percentage is 35% (a low‑income threshold), your credit would be $2,100 (35% × $6,000). If your percentage is 20%, the credit would be $1,200 (20% × $6,000).

How to claim the credit (step-by-step)

  1. Gather documentation: receipts, canceled checks, and the care provider’s name, address, and taxpayer identification number (TIN/EIN/SSN). Keep records for at least three years. (IRS)
  2. Complete IRS Form 2441: Part I reports care providers and expenses; Part II computes the credit. Attach Form 2441 to your Form 1040 when you file. See About Form 2441 on the IRS site for the form and instructions. (IRS)
  3. Coordinate with Dependent Care FSAs: if you participate in a dependent care flexible spending account (DCFSA) through your employer, the amount excluded from income will reduce the expenses you can use for the credit. You cannot double‑claim the same dollar. (IRS Publication 503)
  4. File accurately: include provider TINs and accurate expense totals to avoid delays or inquiries.

Recordkeeping and documentation

  • Keep receipts that show dates, amounts, and the provider’s details. Electronic receipts are acceptable.
  • If the provider is an individual (e.g., a babysitter), you still need their SSN or EIN and should report payments properly if they’re considered household employment.

Common mistakes to avoid

  • Claiming ineligible expenses: school tuition for grades beyond kindergarten, overnight camp, or amounts paid to a spouse/parent of the child usually don’t qualify.
  • Not reporting provider TINs: missing or incorrect TINs trigger IRS notices.
  • Double‑claiming: using the same expense for both a DCFSA exclusion and the credit.

Professional tips

  • Review Form 2441 instructions early in tax season to confirm what qualifies and which provider information you must collect. (IRS)
  • If you expect a large change in childcare costs or employment status, adjust your withholding or estimated payments to avoid surprises.
  • When in doubt, consult a qualified tax professional — I’ve helped clients identify eligible expenses and properly allocate DCFSA amounts to maximize benefit.

Where to learn more

Internal resources

Disclaimer

This article is educational and not personalized tax advice. Rules change and individual situations vary; consult a CPA or enrolled agent for advice specific to your return.