Key Takeaways
The Child and Dependent Care Credit helps working families reduce federal income taxes: This nonrefundable tax credit covers eligible child care and dependent care expenses incurred while taxpayers work or actively look for employment.
The credit covers 20% to 35% of qualifying expenses in 2025: Eligible taxpayers may claim a maximum calculated credit of $1,050 for one qualifying person or $2,100 for two or more qualifying persons, subject to income and tax liability limitations.
Eligibility depends on earned income and qualifying dependents: The credit generally applies to children under age 13, certain dependents incapable of self-care, and qualifying spouses who cannot care for themselves. Special rules apply to married taxpayers, full-time students, and individuals with disabilities.
Qualifying care expenses include daycare and caregiver services: Eligible costs may include daycare centers, babysitters, nannies, preschool care, after-school programs, and certain summer day camps. Expenses covered by tax-free employer dependent care benefits generally cannot be claimed again.
IRS Form 2441 is used to claim the credit: Taxpayers must maintain records of qualifying care expenses, identify care providers, and report applicable employer-provided dependent care benefits. Eligible families may also qualify for the Child Tax Credit on the same federal tax return.
Paying for child care or caring for a family member who cannot care for themselves can be expensive. Daycare centers, babysitters, and in-home caregivers can place significant financial pressure on working families.
Fortunately, the federal government offers the Child and Dependent Care Credit (CDCC), a tax benefit designed to help eligible taxpayers offset certain care expenses incurred while working or looking for work.
For the 2025 tax year, generally filed in 2026, the credit covers between 20% and 35% of qualifying care expenses, depending on adjusted gross income (AGI).
Understanding the eligibility requirements, qualified expenses, and filing procedures can help you determine whether you qualify for this federal tax credit.
What Is the Child and Dependent Care Credit?
The Child and Dependent Care Credit is a nonrefundable federal income tax credit available to eligible taxpayers who pay for qualifying care services so they can work or actively look for employment.
The credit may apply to expenses involving:
Qualifying children under age 13.
Certain dependents who are physically or mentally incapable of caring for themselves.
Certain spouses who cannot care for themselves.
Unlike a tax deduction, which reduces taxable income, this credit directly reduces qualifying federal income tax liability.
Because it is nonrefundable, it cannot independently generate a refund beyond the qualifying income tax liability available to offset.
How Much Is the Child and Dependent Care Credit for 2025?
For 2025, the credit generally equals 20% to 35% of eligible care expenses.
The maximum amount of expenses considered depends on the number of qualifying individuals.
Number of Qualifying Persons: One / Maximum Eligible Expenses: $3,000 / Maximum Calculated Credit at 35%: $1,050.
Number of Qualifying Persons: Two or More / Maximum Eligible Expenses: $6,000 / Maximum Calculated Credit at 35%: $2,100.
The credit percentage decreases as adjusted gross income increases.
For taxpayers with AGI above $43,000, the applicable percentage is generally 20%.
There is no complete income-based phaseout, although the credit is subject to earned income requirements and other limitations.
Who Qualifies for the Child and Dependent Care Credit?
To claim the credit, taxpayers generally must meet several requirements.
You must have paid qualifying expenses so you could work or look for work.
You generally must also have earned income during the tax year.
Married taxpayers usually must file jointly, although exceptions apply to certain separated spouses.
The person receiving care must satisfy the IRS qualifying-person rules, and you must identify the care provider on your federal tax return.
Who Is a Qualifying Person?
A qualifying person generally includes:
A dependent child younger than age 13 when the care was provided.
Your spouse who is physically or mentally incapable of self-care and lived with you for more than half the year.
A qualifying dependent who cannot care for themselves and meets the applicable residency and dependency requirements.
Special rules apply to qualifying children of divorced or separated parents.
A child may qualify for the custodial parent's Child and Dependent Care Credit even when the noncustodial parent claims the child for certain other tax benefits.
What Expenses Qualify for the Credit?
Eligible expenses generally must be necessary for the care and protection of a qualifying person while you work or look for employment.
Common qualifying expenses include:
Daycare center fees
Babysitting expenses
In-home child care
Certain nanny expenses
Nursery school and preschool expenses primarily for care
Before-school and after-school care programs
Qualifying summer day camps
Certain adult dependent care services
Some household services, such as cooking and light housekeeping, may qualify when they are incidental to and directly related to the care of a qualifying person.
When a caregiver is a household employee, certain employment taxes may also count as qualifying care expenses.
What Expenses Do Not Qualify?
Common expenses that generally do not qualify include:
Overnight summer camps
Kindergarten or higher-grade tuition
Transportation costs unrelated to qualifying care services
Personal entertainment expenses
Payments to your spouse
Payments to certain dependents or prohibited relatives
Payments to your child for providing care generally do not qualify if that child is your dependent or was younger than age 19 at the end of the year.
The care provider must also satisfy the applicable IRS requirements.
How Does Earned Income Affect Eligibility?
You generally must have earned income to claim the Child and Dependent Care Credit.
Earned income may include wages, salaries, tips, and qualifying net earnings from self-employment.
Married couples filing jointly generally must both have earned income.
However, special rules apply when one spouse is a full-time student or physically or mentally incapable of self-care.
Under those rules, the IRS may assign deemed earned income of $250 per month for one qualifying person or $500 per month for two or more qualifying persons, subject to the applicable conditions.
The expenses used to calculate the credit generally cannot exceed the relevant earned income limitation.
Child and Dependent Care Credit Calculation Example
Suppose a married couple has two qualifying children and pays $6,000 in eligible daycare expenses during 2025.
Their adjusted gross income is $24,000, and both spouses have sufficient earned income.
They also received $5,000 in qualifying tax-free dependent care benefits from an employer.
Credit Calculation: Total Qualifying Daycare Expenses / Amount: $6,000.
Credit Calculation: Maximum Eligible Expenses for Two Children / Amount: $6,000.
Credit Calculation: Tax-Free Employer Dependent Care Benefits / Amount: $5,000.
Credit Calculation: Remaining Expenses Available for the Credit / Amount: $1,000.
Credit Calculation: Adjusted Gross Income / Amount: $24,000.
Credit Calculation: Applicable Credit Percentage / Amount: 30%.
Credit Calculation: Potential Child and Dependent Care Credit / Amount: $300.
In this example, the couple may calculate a $300 credit, subject to the applicable federal income tax liability limitation.
Can You Claim the Credit With Employer-Provided Child Care Benefits?
Yes, in certain circumstances.
Some employers offer dependent care assistance programs that help employees pay qualifying child care expenses.
These programs may include direct reimbursements, employer-sponsored daycare, or dependent care Flexible Spending Accounts (FSAs).
For 2025, the maximum qualifying dependent care benefits exclusion is generally $5,000, or $2,500 for Married Filing Separately.
Employer-provided dependent care benefits are generally reported in Box 10 of Form W-2.
However, the same expenses cannot be used for both the tax-free employer benefit and the Child and Dependent Care Credit.
Excluded benefits generally reduce the expense limit available for calculating the credit.
For example, if you have one qualifying child and exclude $5,000 in dependent care benefits, the $3,000 expense limit is reduced to zero. You generally cannot claim an additional Child and Dependent Care Credit.
Beginning in 2026, the federal dependent care assistance exclusion increases to $7,500 for qualifying taxpayers, but that higher limit does not apply to 2025 returns.
How to Claim the Child and Dependent Care Credit
Eligible taxpayers claim the credit using IRS Form 2441, Child and Dependent Care Expenses.
To prepare the form, gather your care expense records and the care provider's identification information.
Generally, the IRS requires the provider's:
Name
Address
Social Security number or Employer Identification Number, as applicable
Amount paid for qualifying care services
Form W-10 may be used to request the provider's identification information.
If the provider refuses to supply a required identification number, special due-diligence procedures may apply.
Complete Form 2441 and attach it to Form 1040 or another applicable federal individual income tax return.
Taxpayers who received dependent care benefits through an employer generally must complete Part III of Form 2441, even if they cannot claim the credit.
Child and Dependent Care Credit vs. Child Tax Credit
These federal credits have different purposes.
Tax Credit: Child and Dependent Care Credit / Purpose: Helps offset qualifying care expenses incurred while working or looking for work / Refundability for 2025: Nonrefundable.
Tax Credit: Child Tax Credit / Purpose: Provides tax relief for qualifying dependent children under age 17 / Maximum 2025 Credit: $2,200 per qualifying child / Refundability: Up to $1,700 may be refundable through the Additional Child Tax Credit.
Eligible families may qualify for both credits on the same federal tax return.
Get Help Claiming the Child and Dependent Care Credit
The Child and Dependent Care Credit can help eligible working families reduce federal income tax expenses related to qualifying child care or dependent care.
However, eligibility depends on earned income, qualifying individuals, eligible expenses, employer benefits, and filing status.
ContNow Tax Preparation LLC provides online individual and small business tax preparation services, including assistance with federal tax credits and deductions.
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