Understanding the Child and Dependent Care Tax Credit (CDCTC)

If you hire someone to care for a young child, disabled spouse, or other disabled dependent in your household so that you can job-hunt or go to work, you might be eligible for a federal tax credit that could save you money. Taking advantage of the Child and Dependent Care Tax Credit means filling out an additional form when you file your federal tax return. But given that the average annual cost of childcare is more than $13,000 per child, wouldn’t it be nice to get some of that money back?

Find out if you might qualify for this tax credit so you can take advantage of it at tax time.

What Is the Child and Dependent Care Tax Credit?

The Child and Dependent Care Tax Credit (CDCTC) is designed to help defray the cost of care and keep taxpayers who are able to work in the labor market. The credit has existed in its current form since the mid 1970s. It’s a federal tax break available to people who pay for care for a dependent (a child under age 13 or a mentally or physically disabled person in their household) so that they can look for work or continue working. It’s a tax credit, not a deduction (we’ll get to the finer points on how those differ below).

Both the person needing care and the work-related nature of your expenditure need to be “qualifying” in the eyes of the IRS. To claim this credit, you’ll need to provide information, including a taxpayer identification number, for the person or business providing the care.

The Child and Dependent Care Tax Credit is something to be aware of as you create a family budget plan.

Why the Child and Dependent Care Tax Credit Credit Is Nonrefundable

The Child and Dependent Care Tax Credit is “nonrefundable,” which means it only offsets your federal tax up to whatever amount you owe. If you owe, say, $500 to the federal government and your credit equals $700, your credit will wipe out the $500 you owe, but you won’t get a refund of the $200 difference.

It’s also important to understand the difference between tax credits vs. tax deductions. A deduction would reduce your taxable income which is used to compute what you owe the IRS; a credit reduces the amount you actually have to pay in taxes.

Child and Dependent Care Tax Credit vs. Child Tax Credit: Key Differences

Tax season comes with lots of terminology, so it’s worth noting that the Child and Dependent Care Tax Credit is different from the Child Tax Credit (despite their similar-sounding names). Both are federal tax programs and many people who are eligible for one are also eligible for the other. Here’s a side-by-side look at key elements of the two credits:

Feature	Child and Dependent Care Tax Credit	Child Tax Credit
Credit Type	Nonrefundable credit	Nonrefundable credit
Purpose	Defrays cost of child care (in or out of home) or care for a disabled adult dependent	Defrays general costs of raising children (food, clothing, diapers, education, childcare expenses, household costs)
Work Requirement	Tax filer(s) must be working or looking for work	No work requirement
Age Eligibility	Children must be under age 13; adult dependents can be a mentally or physically disabled adult of any age	Qualifying child must be under 17 at end of the tax year
Dependent Requirements	Must have lived with you for more than half the tax year	Must be claimed as your dependent; must not provide more than half of their own support; must have lived with you for more than half the tax year
Additional filing Requirements	Requires Form 2441	Requires Schedule 8812

Taxpayers with little or no federal income tax liability may also qualify for the Additional Child Tax Credit (ACTC), up to $1,700 per qualifying child depending on your income. You must have earned income of at least $2,500 to be eligible for the ACTC. This is a refundable credit, meaning that if your credit is more than you need to pay as tax, you will receive a tax refund.

How Much Is the Child and Dependent Care Credit in 2026?

The child and dependent care credit amount you might be entitled to for the 2026 tax year will depend on how many dependents you care for, your caregiving costs, and your income.

Maximum Qualifying Expense Limits ($3,000/$6,000)

The number of dependents you care for will influence the maximum amount of care expenses that you can claim on your 2026 federal return (due in April 2027). If you have one dependent, you can claim a percentage of up to $3,000 in expenses. If you have two or more dependents, you can claim a percentage of up to $6,000 in expenses.

The next step is to determine how much you have actually paid for dependent care expenses by adding up the costs of daycare or in-home care for your dependent during your working hours.

Once you have your number, you’ll multiply it by your personal credit percentage, which is determined by your adjusted gross income (AGI).

New 2026 Credit Percentages: The 20% to 50% Sliding Scale

The CDCTC dollar limits of up to $3,000 for one dependent and up to $6,000 for two or more dependents is not the actual credit amount. In other words, you cannot be credited up to $3,000 or $6,000. Instead, those dollar limits represent the maximum amount of expenses you can use to calculate the credit.

Your actual tax credit for the Child and Dependent Care Tax Credit program in the 2026 tax year will be between 20% and 50% of your claimed expenses. The greater your AGI, the lower your percentage. Because the maximum credit percentage is 50%, the most a taxpayer can be credited is $1,500 for one dependent and $3,000 for two or more dependents.

2026 Income Limits and Phase-Out Thresholds

Not everyone who is paying for a caregiver for a dependent will benefit fully from this tax credit. There is a child and dependent care credit income limit, of sorts: As noted above, the amount of the credit you’re entitled to begins to step down from 50% when your AGI reaches a certain level. At its lowest level, it hits 20%.

Adjusted Gross Income (AGI) Tiers for Maximum Savings

Here’s how your credit percentage will change based on your AGI:

Credit Percentage	AGI (Joint Filers)	AGI (Single Filers)
50%	Up to $30,000	Up to $15,000
35%	Over $30,000 and up to $150,000	Over $15,000 and up to $75,000
Between 35% and 20%	Over $150,000 and up to $206,000	Over $75,000 and up to $103,000
20%	Over $206,000	Over $103,000

Eligibility: Who Qualifies for the Child and Dependent Care Credit?

To understand whether you can qualify for the tax credit, you or your tax preparer will need to read the fine print in the tax code. As we’ve noted, your child must be under age 13 and your child or other dependent must live with you at least half of the year.

Here are some other important factors:

Identifying a “Qualifying Individual” for Tax Purposes

In order for your dependent to qualify for the CDCTC, a child needs to be under 13 when the care was provided. An adult needs to be physically or mentally disabled. There are further requirements related to any income earned by a disabled person, and the dependent person’s tax status. You’ll need to include your dependent’s name and Social Security number on your tax return.

The Earned Income Requirement for Parents and Spouses

The CDCTC reduces the amount you have to pay in taxes. So in order to qualify for it, you must be earning an income such that you are required to pay federal income tax. When spouses file a joint tax return, they both need to have earned income from work in order to claim the credit.

Rules for Full-Time Students and Disabled Dependents

What if your spouse isn’t earning an income? There is an exception to the two-spouses-working rule: If your spouse is a full-time student or is disabled and not able to work, they will be treated as if they have earned income, provided they have lived with you for at least half of the year.

If one spouse is disabled or a full-time student for at least five months during the year, the IRS assigns to that spouse the higher of $250 or their actual income for the month for one qualifying person. The number rises to $500 for two or more qualifying dependents.

Recommended: Bank Accounts for College Students

How the OBBBA Changes Impact Middle-Income Families

The federal government’s 2025 Reconciliation Legislation (H.R. 1), also known as the One Big Beautiful Bill Act (OBBBA), made one change to the CDCTC. In the 2025 tax year, you could claim up to 35% of eligible expenses (again, on a sliding scale based on AGI). But for the 2026 tax year, the maximum percentage increased to 50%. This might translate to a slightly higher credit for some low- and middle-income tax filers. Unfortunately, it doesn’t keep pace with inflation. And many of the lowest-income Americans, who struggle to pay for child care, don’t benefit from the credit at all because they don’t owe taxes that the credit could offset.

This is not the only way that the OBBBA has affected taxes. Parents should note that the OBBBA also increased the maximum Child Tax Credit to $2,200 from $2,000 in 2025, with annual adjusting for inflation to begin in 2026.

Keep an eye on tax prep tips from trusted sources as 2026 progresses, and consult a tax advisor if you are unsure about anything.

Qualified vs. Disqualified Expenses

One of the most significant questions you’ll have to ask yourself if you seek to receive the CDCTC is whether the care you spend money on is a qualified expense in the eyes of the IRS. If the main purpose of the expense is to ensure a qualifying person’s well-being and protection, the answer is most likely yes. Here’s a look at which expenses are eligible in more detail:

Eligible Expenses

Expenses that are eligible for the Child and Dependent Care Tax Credit include:

•   Expenses for a child in nursery school, preschool, or a similar program for a child below the level of kindergarten

•   Expenses for before- or after-school care of a child in kindergarten or a higher grade

•   Transportation expenses for travel by a care provider with a qualifying person to or from a place where care is provided

•   Fees or deposits you paid to an agency or preschool to get the services of a care provider

•   Household services such as cooking and cleaning meet the expense test if they are at least partly for the well-being and protection of a qualifying person.

•   Taxes you pay on wages for qualifying child and dependent care services

Ineligible Expenses:

Certain expenses are not eligible for CDCTC, such as:

•   School expenses for kindergarten or a higher grade

•   Overnight summer camps

•   Summer school

•   Tutoring programs

Recommended: Best Checking Account Offers

Documents You Need to Claim the Credit (Form 2441)

Claiming the tax credit isn’t a last-minute tax prep to-do, something you can pull off the day before your taxes must be filed. You’ll want to include IRS Form 2441 in your tax preparation checklist.

You’ll also, as noted above, need some tax information from your care provider, including the person or business name, address, Social Security or Employer Identification Number, as well as the amount you paid to the person or business.

And you’ll need to have information about your child or dependent handy, including the person’s Social Security number and, for a disabled adult, information about any money that person earned during the tax year and their tax filing status (for example, does the disabled person file taxes jointly with someone?).

How to Calculate Your Child and Dependent Care Credit

When you file your taxes, you (or your tax preparer) will need to do some math. There’s no child and dependent care credit calculator you can type a few numbers into, but form 2441 will walk you through the calculation of your child and dependent care credit amount. As long as you know your earned income and the other details noted above, it should be fairly simple to fill in the blanks.

Managing the Interaction Between Dependent Care FSAs and the CDCTC

One hiccup in filing for the CDCTC can come up if you, through your employer, have pre-tax money withdrawn from your paycheck to contribute to a Dependent Care Flexible Spending Account (FSA). You cannot use your FSA money to pay for the same expenses that you claim on form 2441 for the tax credit. You’ll need to identify care expenses that exceed the $7,500 FSA limit (or whatever you withheld in your FSA) and use those to apply for the credit.

The Impact of the New $7,500 FSA Exclusion Limit

If you have had an FSA in the past and also claimed the CDCTC, it’s worth noting that the One Big Beautiful Bill Act increased the FSA limit from $5,000 to $7,500 for couples filing jointly, and from $2,500 to $3,750 for single filers. This means that if you have qualified for both in the past, your care expenses will need to exceed a higher number ($7,500) in order for you to take the Child and Dependent Care Tax Credit in 2026. For many families however, it’s quite easy to exceed $7,500 a year in child or dependent care expenses.

The Takeaway

Child and dependent care is a significant line in many family budgets, and the Child and Dependent Care Tax Credit can provide some relief to tax filers. There are some hoops to jump through to figure out which expenses are eligible and an extra form to fill out for your federal tax filing, but if you — with the help of a tax prep professional, if needed — can account for your expenses, you could find your 2026 federal tax bill reduced. Taking advantage of every possible tax break is all part of managing your money for maximum benefit.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, named the #1 Bank in the U.S. for the fourth year in a row by Forbes (2026).* Enjoy up to 3.10% APY on SoFi Checking and Savings.

FAQs

Can I claim the Child and Dependent Care Tax Credit and a dependent-care FSA?

It is possible to have an employer-sponsored Flexible Spending Account (FSA) for childcare expenses and claim the CDCTC. However, you cannot use your FSA money to pay for the same expenses that you claim on form 2441 for the tax credit. It’s not hard for a family’s expenses to exceed the $7,500 a married couple filing jointly can put aside in a child care FSA. Anything over that could be claimed for the CDCTC.

What is the income limit for the child and dependent care credit in 2026?

The Child and Dependent Care Tax Credit is available on a sliding scale based on income. There is no upper income limit to qualify for the CDCTC, but married couples filing jointly will hit the minimum credit percentage of 20% if their adjusted gross income exceeds $206,000, or $103,000 for single filers.

Does the credit apply to summer camps or after-school programs?

Tax filers can claim costs for summer camp as a dependent-care expense when applying for the Child and Dependent Care Tax Credit as long as the camp is not an overnight camp. After-school programs for children are also considered a claimable expense.

Can I claim the child and dependent care credit if I am married filing separately?

Generally, a married person who files federal taxes separately from their spouse cannot claim the Child and Dependent Care Tax Credit. However, the IRS does make an exception in certain cases where the spouses live apart but where the tax filer meets other qualifying characteristics for the credit. Military families sometimes fit into this bucket. Speak with a tax preparer regarding the finer points of this policy.

Is the child and dependent care credit refundable this year?

The Child and Dependent Care Tax Credit is not refundable for the 2026 tax year. If the amount you are entitled to as a credit exceeds the amount you owe in federal taxes, you will not get the difference as a tax refund.

---

Photo credit: iStock/fotostorm

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2026 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 5/28/26. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet. We do not charge any account, service, or maintenance fees for SoFi Checking and Savings. We do charge transaction fees for outgoing wire transfers, Instant Transfers, and global remittance transfers. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/. *Awards or rankings from Forbes are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOBNK-Q226-165