Can You Get a Credit for Child Care Costs to Work or Look for Work?
Learn how the child care tax credit can help offset costs while you work or job hunt, who qualifies, eligible expenses, and how it interacts with employer benefits.
Child care costs can be a major expense for working parents, but tax credits can help offset the burden. The Child and Dependent Care Credit directly reduces the amount of taxes owed, making it a valuable benefit for eligible families.
Who Qualifies for the Credit
Eligibility depends on income, employment status, and the dependent’s age and relationship to the taxpayer. The person receiving care must be a child under 13 or a dependent who is physically or mentally incapable of self-care. The care must allow the taxpayer—and, if married, their spouse—to work or look for employment.
Single and married taxpayers can claim the credit, but married couples must file jointly. If one spouse lacks earned income, the credit is generally unavailable unless that spouse is a full-time student or disabled. Earned income includes wages, salaries, tips, and self-employment earnings but excludes investment income and Social Security benefits.
The credit decreases as income rises. For 2024, taxpayers with an adjusted gross income (AGI) of $15,000 or less can claim up to 35% of qualifying expenses, gradually dropping to 20% for those earning $43,000 or more. The credit is nonrefundable, meaning it can reduce tax liability to zero but does not provide a refund beyond that.
Eligible Expenses
Only specific expenses qualify. Payments to daycare centers, babysitters, nannies, and certain after-school programs are eligible, provided the caregiver is not a spouse, the child’s parent, or another dependent.
Care provided outside the home qualifies if the facility complies with state and local regulations. This includes licensed daycare centers and nursery schools but excludes kindergarten and higher-grade education costs. If care is provided in the taxpayer’s home, payments to a household employee—such as a nanny—can qualify, though employment tax rules may apply.
Summer day camps are eligible, but overnight camps are not. Extracurricular activities like music lessons or sports leagues do not qualify unless they are part of a broader child care program.
How to File
To claim the credit, taxpayers must complete IRS Form 2441 and attach it to Form 1040 or 1040-SR. The form calculates the credit based on qualifying expenses, income, and applicable percentage rates. Taxpayers must provide the care provider’s name, address, and taxpayer identification number (TIN) or Social Security number. Missing this information may result in the IRS disallowing the credit.
For 2024, the maximum allowable expenses are $3,000 for one qualifying individual and $6,000 for two or more. The credit is calculated as a percentage of these expenses, which varies based on AGI. If multiple children receive care, taxpayers cannot claim more than the total amount actually paid, even if the eligible expense limit is higher.
Electronic filing software helps guide taxpayers through the process, but those filing paper returns should carefully review IRS instructions to avoid errors. The IRS may request additional documentation, so maintaining organized records of payments and provider details is recommended.
Coordination with Employer Benefits
Many employers offer Dependent Care Flexible Spending Accounts (FSAs), which allow employees to set aside pre-tax dollars for child care expenses. However, expenses reimbursed through an FSA cannot also be claimed for the credit.
For 2024, the maximum FSA contribution is $5,000 for married couples filing jointly or $2,500 for those filing separately. If an employee uses the full $5,000 allowance, they cannot claim additional child care expenses for the credit. However, if total qualifying expenses exceed the FSA limit, the excess may still be eligible for the credit. For example, if a taxpayer incurs $7,000 in eligible expenses and uses $5,000 from an FSA, the remaining $2,000 could be considered for the credit calculation.
Required Documentation
Proper records are necessary to support a claim. Receipts or statements from child care providers should include the provider’s name, address, and taxpayer identification number (TIN) or Social Security number, along with the total amount paid. If care is provided by an individual, taxpayers may need to issue Form W-10, Dependent Care Provider’s Identification and Certification, to collect the required information.
Bank statements, canceled checks, or electronic payment records can further substantiate payments. Employers may also provide documentation if a Dependent Care FSA was used, such as a year-end benefits statement showing the amount reimbursed. Keeping these records for at least three years after filing is advisable in case of an audit.