What Is IRS Publication 503: Child and Dependent Care Expenses?

IRS Publication 503 is a document published every year by the Internal Revenue Service (IRS) laying out the criteria that must be met for an American taxpayer to claim the Child and Dependent Care Credit. A child and dependent care expense could be anything paid to a daycare center or babysitter, or summer camp or other provider costs.

Key Takeaways

  • IRS Publication 503 outlines the eligibility criteria for taxpayers seeking the child and dependent care expenses credit.
  • Examples would be qualified child daycare, babysitting, or housekeeping for either children under age 13 or disabled dependents of any age.
  • The credit is limited to either a $3000 or $6000 cap per year and is subject to income limits as well as requirements for each of the taxpayer, care provider, and dependents.

Understanding IRS Publication 503

The Internal Revenue Service (IRS), the agency in charge of collecting federal taxes, posts Publication 503 to its website. The document lays out the conditions under which a taxpayer can claim the nonrefundable Child and Dependent Care Credit. Because the cost of caring for a child or dependent is often greater than a second income, there can be an incentive for second earners to stop working and care for children or dependents.

The credit is designed to counteract that incentive and allow a taxpayer or their spouse to be gainfully employed while providing care. The credit is not only available to couples, however, and can be claimed by single filers.

In order to claim the credit, certain criteria must be met: the persons claimed must be qualified, the taxpayer must have earned income, expenses must be incurred so that the taxpayer could work or look for work, and care payments must be made to a non-dependent.

Up to 35% of expenses related to the care of children and dependents can be claimed by a taxpayer. In addition, expenses related to the care of children apply only to children under the age of 13.

Child and Dependent Care Credit

To receive the credit, the IRS stipulates that the taxpayer, the care provider, and the dependent(s) 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.

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.

The Qualifying Terms

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 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 the IRS instructions on Form 2441.