8567 / When is a taxpayer entitled to claim the child and dependent care tax credit?

The child and dependent care tax credit provides a tax credit to offset the cost of qualifying work-related dependent care expenses (a dependent who is a child must be under age 13 to qualify). Those expenses can include the cost of physically caring for the dependent—and also include household expenses, such as hiring someone to help with cooking and cleaning for a dependent, as long as the expenses are primarily for the benefit of the dependent. The IRS noted that summer day camp expenses can also qualify, but expenses related to overnight camp cannot be used to figure the credit.

For 2024, the maximum eligible work-related childcare expense used to figure the credit is $3,000 for one qualifying child and $6,000 for two or more children. The taxpayer multiplies the amount of childcare expenses incurred by a percentage. The percentage varies depending on the taxpayer’s income. Depending on their income levels, taxpayers can receive a credit worth up to 35% of their qualifying childcare expenses. Once the taxpayer’s income equals or exceeds $43,000, 20% of the expenses qualify. The maximum amount of the credit cannot be more than the taxpayer's earned income for the year, or the smaller of the taxpayer or their spouse's earned income if the taxpayer is married.

To claim the credit, the taxpayer must complete and attach Form 2441 to Form 1040, 1040-SR, or 1040-NR. The credit is entered on Schedule 3 (Form 1040), line 2. The credit is typically nonrefundable.

The taxpayer claiming the credit must subtract employer-provided dependent care benefits, including those provided through a flexible spending account, from total work-related expenses when calculating the credit. The more a taxpayer earns, the lower the percentage of work-related expenses that are taken into account in determining the credit.