Child care is one of the largest expenses for working families. The federal Child and Dependent Care Credit offsets part of the cost of care for a child or another dependent while you work or look for work. It is separate from the Child Tax Credit, and families can often claim both. This guide explains who qualifies, which expenses count, how the credit is calculated, and how recent law changes affect it.
What the credit is
The Child and Dependent Care Credit is a nonrefundable credit equal to a percentage of qualifying care expenses. Nonrefundable means it can reduce your federal income tax to zero but will not produce a refund beyond your tax liability. You claim it on Form 2441, Child and Dependent Care Expenses, attached to Form 1040.
Who qualifies
You may claim the credit if you meet these tests:
Qualifying person test
Care must be for a qualifying person:
- Your dependent child who was under age 13 when the care was provided
- Your spouse who was physically or mentally unable to care for himself or herself and lived with you for more than half the year
- Any other person who was physically or mentally incapable of self-care, lived with you for more than half the year, and was your dependent or could have been except for certain income or filing tests
Earned income test
You, and your spouse if filing jointly, must have earned income from wages or self-employment. A spouse who was a full-time student or incapable of self-care is treated as having earned income of $250 a month for one qualifying person or $500 a month for two or more.
Work-related expense test
The care must allow you, and your spouse if married, to work or look for work. Care while you volunteer or take a vacation does not qualify.
Other requirements
- Married couples generally must file jointly, with limited exceptions for spouses who lived apart.
- Payments cannot go to your spouse, the child’s parent, a dependent you can claim, or your child under 19.
- You must identify the care provider on Form 2441 with name, address, and taxpayer identification number.
Which expenses qualify
Qualifying expenses include:
- Day care centers and family day care
- Babysitters and nannies, including care in your home
- Preschool and pre-kindergarten programs, which are generally treated as care
- Before- and after-school programs for children under 13
- Day camps, including specialty camps such as sports or arts camps
Expenses that do not qualify include:
- Overnight camps
- Tuition for kindergarten or higher grades
- Summer school or tutoring programs
- Transportation by someone other than the care provider
- Care while you are not working, such as on a date night
If you pay a household employee such as a nanny, you may have household employment tax obligations, reported on Schedule H.
How much the credit is worth
Expense limits
Qualifying expenses are capped at $3,000 for one qualifying person and $6,000 for two or more. Expenses also cannot exceed the earned income of the lower-earning spouse.
Credit percentage
The credit equals a percentage of qualifying expenses based on adjusted gross income (AGI).
- Through tax year 2025, the rate was 35% for AGI of $15,000 or less, decreasing by one percentage point for each $2,000 of AGI above $15,000, until reaching 20% for AGI above $43,000. Most middle- and upper-income families received 20%, worth up to $600 for one child or $1,200 for two or more.
- Beginning in tax year 2026, the One Big Beautiful Bill Act, enacted in July 2025, raised the maximum rate to 50%. The rate declines from 50% toward 35% as AGI rises above $15,000, and then can decline further toward a floor of 20% at higher incomes, with the second phase-down beginning above $75,000 of AGI for other filers and $150,000 for joint filers. According to the 2026 Form 2441 instructions, the 20% minimum rate does not apply until AGI exceeds $103,000 for other filers or $206,000 for joint filers. The IRS notes the credit is worth up to $1,500 for one qualifying person and $3,000 for two or more.
The higher rates mean many middle-income families will receive a larger credit than before. Because the precise rate depends on your AGI bracket, use the Form 2441 instructions or tax software for the exact percentage.
Example
A married couple with two children and AGI of $120,000 pays $14,000 a year for day care. Qualifying expenses are capped at $6,000. Under the pre-2026 rules, their credit would have been 20% of $6,000, or $1,200. Under the 2026 rules, because their AGI is below the $150,000 threshold for the second phase-down, their rate is 35%, for a credit of $2,100.
Interaction with a dependent care FSA
Many employers offer a dependent care flexible spending account (FSA) or dependent care assistance program. These allow you to pay care costs with pre-tax dollars. The annual exclusion was $5,000 per household for many years. Under the 2025 law, the limit increased to $7,500 per household ($3,750 for married filing separately) beginning in 2026.
You cannot use the same expenses for both the FSA and the credit. Amounts excluded through an FSA reduce the $3,000 or $6,000 expense limit dollar for dollar. For example, a family with two children that excludes $5,000 through an FSA has only $1,000 of the $6,000 limit left for the credit. With a $7,500 exclusion, no room would remain.
Which is better?
For many middle- and higher-income families, the FSA provides a larger benefit because it avoids federal income tax plus Social Security and Medicare taxes, and often state income tax. Families with lower incomes may benefit more from the credit, especially under the higher 2026 rates. Run both scenarios, or use tax software, before choosing your FSA election during open enrollment.
How to claim the credit
- Keep receipts and records of payments to each provider.
- Get the provider’s taxpayer identification number. Use Form W-10 to request it. Tax-exempt organizations need provide only the name and address.
- Complete Form 2441, including provider information, qualifying persons, and expenses.
- Report FSA benefits from Box 10 of your Form W-2 on Part III of Form 2441.
- Attach Form 2441 to your Form 1040.
If a provider refuses to give a taxpayer identification number, you can still claim the credit by showing due diligence, such as noting the refusal on the form.
Common mistakes
- Including overnight camp or kindergarten tuition
- Claiming expenses after a child turns 13
- Forgetting to subtract FSA reimbursements
- Paying a relative who is your dependent or your child under 19
- Omitting the provider’s identification number
State credits
Many states offer their own child and dependent care credits, often calculated as a percentage of the federal credit. Some state credits are refundable. Check your state revenue department’s guidance.
Records to keep
Keep invoices or receipts from each provider showing the dates of care, the child’s name, and amounts paid, along with proof of payment such as bank or card statements. Retain a copy of each provider’s Form W-10 or other documentation of the taxpayer identification number. If you claimed FSA reimbursements, keep the claim confirmations from your plan administrator. The IRS generally can audit a return for three years after filing, so keep these records at least that long.
Related reading: Earned Income Tax Credit: Who Qualifies, How It Is Figured, and How to Claim It Correctly and Home Office Deduction: Who Qualifies and How to Calculate It.
Frequently Asked Questions
Is the Child and Dependent Care Credit refundable?
No. The federal credit is nonrefundable; it can reduce your tax to zero but will not create a refund beyond that.
What are the expense limits?
$3,000 of qualifying expenses for one qualifying person and $6,000 for two or more.
Do summer day camps qualify?
Yes, day camps generally qualify. Overnight camps do not.
Can I claim both the FSA and the credit?
Yes, but not for the same dollars. FSA exclusions reduce the expense limit available for the credit.
What changed in 2026?
The maximum credit rate rose from 35% to 50%, with phase-downs based on income, and the dependent care FSA limit rose from $5,000 to $7,500.
This article is for general informational purposes only and is not legal, medical, tax, or financial advice. Rules vary by state and change over time; confirm details with the relevant agency or a licensed professional.
