Child and Dependent Care Credit: Definition, Who Qualifies

It is easy to mistake the child and dependent tax credit for its more popular cousin, child tax credit. The child and dependent tax break is unique in that it’s designed to assist people who are working or looking for work with expenses related child or dependent care.

This is a detailed explanation of the credit process, who is eligible and how to claim it.

The CDCC (child and dependent care credit) is a tax credit that parents or caregivers can use to cover qualified care expenses, such as daycare, for children under 13 years of age, for spouses or parents who are unable to care or for other dependents.

To claim the tax credit, you must have earned income during the year and paid the care expenses to be able to work or look for employment.

Because the credit is non-refundable, the CDCC is best for taxpayers who expect to owe taxes. The credit amount will reduce any taxes owed, but taxpayers won’t receive any refund.

It’s 20%-35% for up to $3,000 for one qualifying dependent and $6,000 for two or more. Adjusted gross income determines the exact percentage of eligible expenses that can be claimed.

Here is a quick look at the breakdown by income level and percent. The CDCC does not have an income limit. If you earn more than $43,000 you might still be eligible to claim up to 20%.

In general, you can only qualify for the credit if the person you are paying care expenses for is claimed on your taxes and must be:

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  A child younger than 13.
  

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  A spouse who is physically or mentally unable to take care of themselves.
  

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  A person who is physically or mentally unable to take care of themselves and who you can claim as a dependent on your return (e.g. a parent).
  

You might also be eligible to claim someone who meets the above requirements but you cannot claim them as a dependent.

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  They earned $4,400 or more in gross income.
  

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  They jointly filed a return.
  

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  Your spouse, if you file jointly, could be claimed as dependent on another person’s return.
  

Children who turn 13 in the tax year have special rules. These include newborns, separated or divorced people, and children who are born after that time. For more information, see IRS Publication 503.

You must verify that the care expenses you have paid during the year are eligible or approved by the IRS before you claim the credit.

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  Nursery school.
  

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  Preschool and equivalent care programs for children under kindergarten.
  

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  Pre- and post-school care.
  

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  A carer who watches over your dependent outside of your home (e.g. a neighbor).
  

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  Transport that a carer takes with your qualified dependent (e.g. bus, subway or taxi).
  

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  Dependent care center.
  

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  Fees: Certain deposits and application fees that are paid to care providers, or services providing care.
  

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  Child support payments.
  

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  Costs for kindergarten and higher grades.
  

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  Summer school.
  

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  Tutoring.
  

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  Camp for the Sleepaway.
  

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  Food and lodging, clothing, education, or entertainment, unless they are minor costs that are part of a care program.
  

If your employer contributes to your healthcare expenses, or if you use an employer-sponsored facility for care, you might need to subtract that amount from your total qualifying expenses. See IRS Publication 503. For a complete list and explanation of the applicable rules and stipulations for qualifying expenses, please refer to IRS Publication 503.


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The IRS is very specific about what “care provider” means to claim credit. Anyone can qualify. It is forbidden to pay your spouse or other family members to care for your dependent. Additional rules apply to household employees.

There may also be who are not eligible to provide care.

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  The parent/dependent of the child/dependent (if your child is under 13 years old).
  

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  You or your spouse may claim another dependent on your tax return.
  

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  Your child younger than 19.
  

The IRS will ask you to provide information about the care provider when you claim credit. This includes their name, address, and taxpayer identification number. The TIN of an individual who is hired as a care provider is their Social Security number. For businesses, it’s their employee identification number, or EIN.

IRS Publication 503. This has all the details, but here are some important details:

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  You must file jointly as married couples to claim credit. The credit may be claimed by the primary custodial parent if the couple are legally separated, not married, or divorced. If there is joint custody, and the qualifying dependent is present for the same number of nights during the year, the credit can be claimed by the party with higher income.
  

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  To be eligible, you must have earned income during the year. You cannot count money earned from foreign income, pensions, Social Security benefits, workers’ compensation, unemployment, interest dividends, or child support. More information is available in Publication 503.
  

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  If you and your spouse are married filing jointly and your spouse is a full-time student for at least five consecutive months, they will be considered to have earned income during the period they were enrolled. Volunteer work is not eligible.
  

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  If you work part-time or for less than a year, there are special rules that apply to credit calculation.
  

Tax returns filed by 2023 can claim the child and dependent care credit, provided that qualifying expenses are paid before 2022. To attach the standard 1040, you will need to attach Form 2441 and Schedule 3.

IRS Form 2441 includes a worksheet that will help you determine your credit eligibility. Then, you’ll enter the result at line 2 of Schedule 3. If this seems like a lot of paperwork, don’t be discouraged. Good news is that most tax preparation software can calculate and file credit automatically for you.

You must include the Social Security number of your qualifying dependent, individual taxpayer identification number, or adoption ID number when you claim credit.

It all depends on your circumstances. It is non-refundable so it could make a difference if there are tax bills in the future. The credit is not available if you anticipate a refund.

You might consider other options, in addition to the dependent and child tax credit. Employer-sponsored dependent care flexible expenditure accounts (FSAs), allow you to deduct pre-tax money from your salary and transfer it to an account for qualified expenses.

Contributions are tax-advantaged so you can lower your taxable income by contributing the same amount. This could result in more tax savings than the CDCC credit. Be aware that you cannot “double-dip” or claim the same expenses for the CDCC and dependent care FSA.