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Childcare in the summer. It's a constant challenge for working parents with young kids, often requiring them to cobble together a patchwork of day camps, babysitters, and vacation days just to survive the season.

This gets expensive. And raising kids is already a year-round strain on some household budgets, from the relentless churn of groceries and clothes to non-negotiable extracurriculars. In fact, more than two in five parents recently surveyed by LendingTree said they have fewer kids because of the financial pressure.

All the more reason to minimize the impact wherever you can. And yet some families may be overlooking two helpful tax breaks. Both are more valuable after last year's One Big Beautiful Bill Act, and can take some of the sting out of childcare costs you incur in order to work (or look for work.) Even standard day camps generally qualify.

"Don't leave money on the table," said Lisa Greene-Lewis, a Certified Public Accountant at TurboTax. "Make sure you take advantage of all of the credits you're eligible for."

There are two tax breaks for childcare costs incurred by working parents: the Child and Dependent Care Tax Credit (CDCTC) and the tax deduction that accompanies a Dependent Care Flexible Spending Account (DCFSA).

The Child and Dependent Care Tax Credit

This is a tax credit that reduces your tax bill dollar-for-dollar. The amount of the credit depends on your income bracket, but effective this year, it's calculated differently. The maximum is equal to 50% — rather than 35% — of $3,000 in qualifying childcare expenses for one child and $6,000 for two or more children. It also phases down a lot more slowly than before, falling to 35% and 20% of qualifying expenses at higher income levels. This means you can get up to $1,500 for one child or $3,000 for two or more.

What to know:

•   This is not the same as the Child Tax Credit, which anyone with a qualifying child gets — whether they work or not.

•   This is what's known as a "non-refundable" tax credit, meaning it only reduces what you owe in taxes. In other words, if the credit is bigger than your tax bill, you don't get the difference. Given this, the Urban-Brookings Tax Policy Center estimates the maximum anyone will get is $1,050 for one child and $2,100 for two or more.

•   About 12% of taxpayers with children claimed this credit in the past, though it's not clear how many more would have been eligible, according to the statistics cited by the Congressional Research Service.

•   The same childcare expenses can't tap into both tax breaks (more on that below.)

The Dependent Care Flexible Spending Account

If your employer offers it, a Dependent Care Flexible Spending Account (DCFSA) allows you to use pre-tax income to pay for qualifying childcare expenses. This stretches your money further.

Effective this year, you can set aside up to $7,500 in pre-tax income — up from $5,000 in the past. So if you're subject to 30% income and payroll tax, you'd save $300 per $1,000 you spend on eligible childcare.

What to know:

•   There's no income eligibility on this tax break.

•   You can contribute $7,500 no matter how many children you use the money for.

•   As with a Healthcare FSA, there's a planning risk: Any money left in a Dependent Care FSA at the end of the year is forfeited.

•   Out of 153 million tax returns, only about 1.5 million taxpayers received this benefit in 2017, according to the Congressional Research Service.

How do the two tax breaks overlap?

You may be able to take advantage of both the tax credit and the FSA, though you can't double-dip. In other words, you can't receive both benefits on the same childcare expense, and any FSA money must be subtracted from the maximum you're able to claim with the tax credit.

You'll want to consult a tax advisor to determine which tax break may be more beneficial.

What's an eligible childcare expense?

IRS rules determine which expenses are eligible, but generally speaking:

•   The childcare must be for a dependent under 13. (Though you may also be able to use the tax breaks for adult dependents unable to care for themselves.)

•   Day care, preschool, before- and after-school care, or summer day camp may qualify.

•   And don't overlook this: Even care provided at home by a grandparent or other relative may qualify, as long as they're not under 19 or the parent or spouse.

So what?

Kids are expensive, and every dollar counts. If one or both of these tax breaks can help ease the financial strain, take advantage.

Make sure you:

•   Get the daycare or camp provider's taxpayer ID number and address

•   Keep receipts

•   Review eligibility rules for the FSA here

•   Check if you're eligible for the tax credit with this IRS tool

Related Reading

Why Is Child Care So Expensive? (New York Times)

Grandma as Babysitter: Grandparents as Caregivers (Corporettemoms.com)

More People are Juggling Work and Kids — and Finding They Can't Give 100% to Both (NPR)

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