The Child and Dependent Care Credit is a tax credit you may be able to claim for child care expenses you paid for your dependent child under 13 (no age limit for a disabled dependent) so that you (and your spouse, if filing a joint return) can work or actively look for work.
The amount of the credit is a percentage of child care expenses up to $3,000 per child with a max of $6,000 for two or more children that you paid to a daycare provider for the care of your dependent child under 13 or another disabled dependent regardless of age.
Since the credit was established in 1976, the Child and Dependent Care Credit has largely gone unchanged, but under the American Rescue Plan Act of 2021, huge changes were made, expanding the credit that were effective on your 2021 taxes only (the taxes you likely filed in 2022).
The Child and Dependant Care Credit is not to be confused with the Child Tax Credit that was also changed under the American Rescue Plan Act of 2021.
What were the changes to the Child and Dependent Care Credit?
Tax Year 2021
For the 2021 tax year only, the Child and Dependent Care Credit expanded in several ways under the American Rescue Plan. The percentage and the child care expense thresholds changed. In 2021, you could get a credit for child care expenses of up to 50% of $8,000 ($4,000)for one child under 13, an incapacitated spouse or parent, or another dependent so that you could work. That amount went up to 50% of $16,000 ($8,000) in child care expenses for families with two or more dependents. For the 2021 tax year, the credit was refundable if you lived in the U.S. for more than half the year.
The 2021 Child and Dependent Care Credit amount began to phase out when the taxpayer’s adjusted gross income (AGI) reached over $125,000. Eligible families with an AGI of $125,000 or less would be eligible to get a credit worth 50% of their qualifying child care expenses. The credit percentage decreased for families with an AGI over $125,000, and the credit is completely phased out for families with an AGI of more than $438,000.
Tax Year 2022
The 2021 expansion and changes to the Child and Dependent Care Credit expenses under the American Rescue Plan Act of 2021 expired.
The Child and Dependent Care Credit reverted to is pre-2021 provisions and could have gotten you up to 35% of $3,000 ($1,050) of child care expenses for a dependent child under 13, an incapacitated spouse or parent, or another dependent so that you could work or look for work. For families with two or more dependents, the credit was up to 35% of $6,000 in expenses ($2,100). The credit started to phase out when your adjusted gross income went above $15,000
How to qualify for the Child and Dependent Care Credit?
In order to qualify for the Child and Dependent Care Credit, you must:
- Pay expenses for a qualifying individual to enable you or your spouse to work or actively look for a job. The work/look-for work requirement for one spouse is waived if they were a full-time student or disabled (as long as they lived with the other spouse for more than 6 months in 2023).
- Have earned income. Earned income is money you earn from a job. Income from an investment or dividend does not qualify as earned income. The earned income requirement for one spouse is waived if they were a full-time student or disabled (if they lived with the other spouse for more than 6 months in 2023).
- Provide the care provider’s information on your tax return. This includes name, address, and either their Social Security number (SSN) or an Employer Identification Number (EIN). In order to claim the expenses you pay your provider, the provider can not be your spouse, a parent of the dependent child, another dependent claimed on your tax return, anyone under the age of 18 unless it is their primary business, or your child who is age 18 or younger (even if they are not claimed as a dependent on your tax return).
Note: If you are married, you and your spouse must file as married filing jointly to qualify for this credit. Generally, you may not take this credit if your filing status is married filing separately. TurboTax will ask you simple questions to help determine the best filing status for you.
Who is a qualifying individual for the Child and Dependent Care Credit?
A qualifying individual for the Child and Dependent Care Credit generally is:
- Your dependent qualifying child who is age 12 or younger (no age limit if incapacitated) at the time the child care is provided,
- Your spouse who was physically or mentally incapable of self-care and lived with you for more than half of the year
- An individual who was physically or mentally incapable of self-care, lived with you for more than half of the year, and either was your dependent, or could have been claimed as your dependent but weren’t because their gross income was greater than $4,700, or they filed a joint return, or you (or your jointly-filing spouse) could be claimed as a dependent on somebody else’s return.
Frequently Asked Questions about Child and Dependent Care Credit
Question: I send my child to summer camp or sports camp so I can work. Do I qualify for the Child and Dependent Care Credit?
Answer: Yes, because the expenses you paid to send your child to summer camp or a sports camp while you work are considered qualified expenses for the Child and Dependent Care Credit.
Question: My child attends an after school program, does that qualify for the Child and Dependent Care Credit?
Answer: Yes, If you pay for programs before and after school so you can work, then the expenses qualify for the Child and Dependent Care Credit.
Question: I pay for bus transportation to and from school for my child, does that count toward the Child and Dependent Care credit?
Answer: No, money spent on transportation to and from school or after school care or camp does not count toward the Child and Dependent Care credit.
No matter what moves you made last year, TurboTax will make them count on your taxes. Whether you want to do your taxes yourself or have a TurboTax expert file for you, we’ll make sure you get every dollar you deserve and your biggest possible refund – guaranteed.