What Is the Child and Dependent Care Credit?
The Child and Dependent Care Credit is a non-refundable tax credit for unreimbursed childcare expenses paid by working taxpayers. This child and care credit is designed to encourage taxpayers to pay childcare expenses so that they can remain gainfully employed.
The Child and Dependent Care Credit is claimed on Form 2441 for taxpayers that are filing Form 1040, or Schedule 2 for Form 1040A.
- The child dependent care credit can range from 20% to 35% of $3,000 for a qualifying child or dependent.
- This credit for child and dependent care expenses can help taxpayers pay for childcare and remain employed.
- The credit is also available for taxpayers with higher incomes.
Understanding the Child and Dependent Care Credit
The taxpayer, the care provider, the dependent/dependents must all meet certain requirements in order for the taxpayer to qualify for the credit. The Child and Dependent Care Credit is limited to a range of 20% to 35% of $3,000 for one qualifying child or dependent under age 13 or $6,000 for two or more qualifying persons, depending on the taxpayer's Adjusted Gross Income. For example, if you have two children under 13 in care, you spent $4,800 on that care during the tax year, and your AGI allows you to take a 30% credit, you would be able to claim a $1,440 credit on your tax return. Unlike some tax credits, the child and dependent care credit is still available to taxpayers with higher incomes, although the percent of dependent care expenses they could claim would be lower.
The Child and Dependent Care Credit is aimed at providing tax breaks for many parents who claim responsibility for the cost of childcare, including daycare center fees, babysitters, non-overnight summer camps, and other care providers, who either look after qualifying children under the age of 13 or, or tend to disabled dependents of any age. The cost of a cook, housekeeper, maid, or cleaning person, who provides ancillary care for a child or dependent, is also considered a childcare expense. And although the credit is geared toward working parents and/or guardians, taxpayers who were either full-time students or were unemployed for part of the year may also qualify for the credit.
Claim the Child and Dependent Care Credit on Form 2441 if you are filing Form 1040, or Schedule 2 if filing Form 1040A.
Qualifying for the Child and Dependent Care Credit
Individuals must satisfy the following criteria, in order to qualify for the Child and Dependent Care Credit:
- The childcare service must have been utilized in order to free up a parent to either seek employment or maintain an existing job.
- Individuals must be the custodial parent or main caretaker of the child or dependent in question.
- An individual’s filing status must be single, head of household, qualifying widow or widower with a qualifying child, or married filing jointly.
- Individuals (and spouses, if they are married and filing jointly) must have earned an income for the tax year.
- Your child or dependent must be under 13 years of age or must be disabled and physically or mentally incapable of self-care.
- The childcare provider may not be the child’s parent or the parent's spouse.
- For divorced or separated parents, the custodial parent (with whom the child resides for the most nights out of the year) can claim the credit even if the other parent has the right to claim the child as a dependent, due to the divorce or separation agreement.
For more information, see IRS instructions for Form 2441.