Understanding the child and dependent care credit

Taxpayers who are paying someone to take care of their children or another member of household while they work, may qualify for child and dependent care credit regardless of their income.

For tax year 2021, the maximum eligible expense for this credit is $8,000 for one child and $16,000 for two or more. Depending on their income, taxpayers could write off up to 50% of these expenses.

For the purposes of this credit, the IRS defines a qualifying person as:

• A taxpayer’s dependent who is under age 13 when the care is provided.
• A taxpayer’s spouse who is physically or mentally unable to care for themselves and lived with the taxpayer for more than half the year.
• Someone who is physically or mentally unable to take care of themselves and lived with the taxpayer for six months and either:
  1. The qualifying person was the taxpayer’s dependent or
  2. They would have been the taxpayer’s dependent except for one of the following:
     • The qualifying person received gross income of $4,300 or more
     • The qualifying person filed a joint return
     • The taxpayer or spouse, if filing jointly, could be claimed as a dependent on someone else’s return

Taxpayers can use the Interactive Tax Assistant on IRS.gov to determine if they can claim this credit.

Credit: IRS Tax Tips