What the Child and Dependent Care Tax Credit covers
The Child and Dependent Care Tax Credit reduces your federal income tax based on what you paid for care while you worked. The IRS calls this the Dependent Care Credit. You claim it on Form 2441, which you attach to your tax return.
The credit covers expenses you paid to someone who cared for your child under age 13, or for a spouse or parent who cannot care for themselves — but only the portion of those expenses that let you work or look for work. Daycare centers, nannies, after-school programs, and summer camps all count. Overnight camps do not.
The credit is not a deduction. A deduction lowers your income before tax is calculated. A credit directly reduces the tax you owe, dollar for dollar, up to a limit. The maximum credit ranges from $600 to $3,000 per year depending on your income and how many dependents you have, but the actual amount you receive depends on what you actually spent and what you earned.
Key Takeaways
- You must have earned income from work in the year you claim the credit, and the care expenses must have been necessary for you to work or search for work.
- The IRS requires the name, address, and tax ID (usually a Social Security number or Employer Identification Number) of whoever provided the care — you will need this before you file.
- Your credit amount depends on your adjusted gross income: the lower your income, the higher the percentage of expenses the credit covers, up to a maximum of 35 percent at higher incomes.
- You report expenses and provider information on Form 2441, which you file with your 1040 tax return; the form calculates your credit automatically.
- If you used a dependent care account through your employer, you must account for that money separately because you cannot claim a credit for expenses you already paid with pre-tax dollars.
Gather your provider information before you file
The IRS requires you to report the name, address, and tax identification number of every person or organization that provided care. If you cannot provide this information, you cannot claim the credit. Start collecting this now, even if you file months later.
For a daycare center or preschool, call the facility and ask for their Employer Identification Number (EIN). They should have this on file. For a nanny or babysitter, ask for their Social Security number. If the provider is reluctant to give you this information, explain that you need it for your taxes and that they are required to report the income anyway.
Write down the full street address where care was provided. A P.O. box is not enough. If the provider moved during the year, you need both addresses and the dates of the move. Keep receipts or statements showing what you paid each month — your tax software or Form 2441 will ask you to list total expenses by provider.
Calculate your may be able to access expenses
Not every dollar you spent on care counts. may be able to access expenses are only those that were necessary for you to work or look for work. If you paid for care while you were on vacation or not working, that does not count.
Add up what you paid for regular childcare, preschool tuition (but not K-12 school), after-school programs, summer day camps, and care for a dependent adult. Include what you paid the provider directly and what you paid through your employer's dependent care account, if you have one. Do not include overnight camps, school tuition for kindergarten and above, or care provided by your spouse or a child under 19.
There is a spending cap: you can claim expenses up to $3,000 per year if you have one dependent, or $6,000 if you have two or more. If you spent more than that, only count up to the limit. Your tax software will enforce this cap automatically when you enter your expenses.
Account for dependent care account contributions separately
If your employer offers a dependent care account (sometimes called a Flexible Spending Account or FSA for dependent care), you can set aside pre-tax money to pay for care. Money you put into that account reduces your taxable income, but you cannot also claim a tax credit for those same expenses.
Here is how to handle it: subtract the amount you withdrew from your dependent care account from your total care expenses. Claim the credit only on the remaining amount. For example, if you spent $4,000 total and used $1,500 from a dependent care account, you can claim the credit on $2,500.
Your employer will send you a Form 5498-FSA or a similar statement showing how much you contributed and withdrew. Keep this with your tax records. If you did not use all the money in the account by the end of the year, you forfeited it — that is how these accounts work — but you still cannot claim a credit for the unused portion.
Find your credit percentage based on your income
The percentage of expenses the credit covers depends on your adjusted gross income (AGI). The lower your income, the higher the percentage. At higher incomes, the percentage drops.
If your AGI is $15,000 or less, the credit covers up to 35 percent of your expenses. For every $2,000 your AGI rises above $15,000, the percentage drops by one percentage point, down to a floor of 20 percent. Most filers with an AGI above $43,000 get the 20 percent rate.
Your tax software calculates this automatically once you enter your AGI and expenses. You do not have to do the math yourself. Form 2441 has a worksheet that shows the calculation if you want to see how it works.
File Form 2441 with your tax return
Form 2441, Childcare Expenses and Dependent Care Benefits, is where you report your care expenses and claim your credit. You can file it on paper or through tax software. Most people use tax software because it walks you through the questions and calculates the credit for you.
The form asks for the name, address, and tax ID of each provider; your total expenses; and whether you received any dependent care benefits through your employer. It then calculates your credit based on your income and expenses. Attach the completed form to your 1040 tax return when you file.
If you file electronically, your software will handle the attachment. If you file on paper, print Form 2441, fill it out, and include it in the envelope with your 1040. The IRS will not process your return without this form if you are claiming the credit.
What happens if you cannot find a provider's tax ID
If you paid someone for care but cannot get their tax identification number, you have a problem: the IRS will not let you claim the credit without it. You cannot leave that line blank or write "unknown."
Try asking the provider again, in writing if necessary. If they still refuse, contact the IRS at 1-800-829-1040 and explain the situation. The IRS may allow you to claim the credit with a statement explaining why you could not obtain the ID, but this is rare and requires documentation of your effort to get it.
If you truly cannot resolve this, you cannot claim the credit for that provider's expenses. You can still claim it for any other providers whose information you do have.
Frequently Asked Questions
Can I claim the credit if I am married and file separately?
You can, but it is usually not worth it. If you file separately, your credit is limited to $600 per year regardless of how many dependents you have. If you file jointly, the limit is $3,000 for one dependent or $6,000 for two or more. Filing jointly almost always gives you a larger credit.
What if my spouse stayed home and did not work?
You cannot claim the credit. The credit requires that you had earned income from work in the year you are claiming it. If your spouse did not work, there is no credit to claim, even if you worked and paid for care.
Does the credit explore to preschool tuition?
Yes, preschool tuition counts as a care expense. Kindergarten and above do not, because those are considered school rather than care. If your preschool includes a school component, ask the provider to break out the care portion separately on your receipt.
Can I claim the credit for care my parent provided?
No, not if your parent is your dependent. You cannot claim a credit for care provided by your spouse or by a child under 19. You also cannot claim it if the person providing care is your dependent for tax purposes, even if they are an adult.
What if I used money from a 529 plan to pay for care?
Money from a 529 education savings plan does not change what you can claim. You still report your actual care expenses and claim the credit based on what you paid out of pocket. The source of the money does not matter to the IRS for this credit.