Childcare is one of the most significant expenses many families face—but it may also provide an opportunity to reduce your tax liability. The Child and Dependent Care Credit is designed to help taxpayers offset the cost of care that allows them to work or actively look for work.

In this week’s Tax Tip Tuesday, we’re breaking down how the Child and Dependent Care Credit works, who qualifies, and how to make sure eligible expenses are properly claimed.

Understanding this credit can help families reduce their tax burden while managing necessary care expenses.

What Is the Child and Dependent Care Credit?

The Child and Dependent Care Credit is a federal tax credit that allows eligible taxpayers to claim a percentage of qualifying care expenses.

This credit applies to care provided for:

• Children under age 13
• A spouse who is physically or mentally unable to care for themselves
• Other qualifying dependents who require care

The key requirement is that the care must be necessary to allow you (and your spouse, if filing jointly) to work or actively look for work.

What Expenses Qualify for the Credit?

To claim the Child and Dependent Care Credit, expenses must be directly related to care—not general household costs.

Common qualifying expenses include:

• Daycare and childcare providers
• Preschool or nursery school
• Before- and after-school care
• Summer day camps (not overnight camps)
• In-home care services

Expenses that typically do not qualify include:

• Private school tuition for kindergarten or higher
• Overnight camps
• Expenses not directly tied to care

Maintaining accurate records of payments and provider information is essential when claiming the credit.

How Much Is the Child and Dependent Care Credit Worth?

The value of the Child and Dependent Care Credit depends on your income and the amount of eligible expenses.

• You can claim a percentage of qualifying expenses (subject to IRS limits)
• The percentage decreases as income increases
• There are maximum expense limits per qualifying individual

While the exact benefit varies, the credit can provide meaningful relief for families with ongoing childcare costs.

Who Is Eligible to Claim the Credit?

To qualify for the Child and Dependent Care Credit, you must:

• Have earned income (or be actively seeking employment)
• Pay for care so you can work or look for work
• Identify the care provider on your tax return
• Meet filing status requirements (generally not married filing separately)

If married, both spouses must typically have earned income unless one spouse is disabled or a full-time student.

Common Mistakes to Avoid

We frequently see taxpayers miss or incorrectly claim this credit due to:

• Failing to obtain the provider’s tax identification information
• Claiming non-qualifying expenses (such as overnight camps)
• Confusing this credit with dependent-related tax credits
• Not coordinating with employer-provided dependent care benefits
• Missing documentation requirements

Because this credit has specific rules, attention to detail is important.

How This Credit Fits Into Your Tax Strategy

The Child and Dependent Care Credit often works alongside other tax benefits, including:

• Child Tax Credit
• Dependent Care Flexible Spending Accounts (FSAs)
• Filing status considerations
• Income planning strategies

Coordinating these elements can help ensure you’re maximizing available tax benefits without overlap or disqualification.

Tax Tip Tuesday Takeaway

The Child and Dependent Care Credit can help offset one of the most significant expenses families face—childcare—while supporting your ability to work or seek employment.

Understanding what qualifies, maintaining proper records, and coordinating this credit with your overall tax strategy can help ensure you receive the full benefit available.

Need Help Determining Eligible Childcare Expenses?

Tax credits involving dependents and care expenses can become complex, especially when combined with other benefits or changing income levels.

Cheshier Tax Resolution works with individuals and families to ensure credits are applied correctly and strategically—helping you avoid mistakes and maximize available savings.

FAQs

What is the Child and Dependent Care Credit?

The Child and Dependent Care Credit is a tax credit that helps offset the cost of childcare or dependent care needed so you can work or look for work.

Who qualifies for the Child and Dependent Care Credit?

You may qualify if you pay for care for a child under 13 or a qualifying dependent so you can work or actively seek employment.

What childcare expenses are eligible?

Eligible expenses include daycare, preschool, before- and after-school care, and in-home care services.

Do summer camps qualify for the credit?

Day camps may qualify, but overnight camps do not qualify for the Child and Dependent Care Credit.

Can both parents claim the credit?

If married, you must typically file jointly to claim the credit, and both spouses must have earned income unless an exception applies.

Is the Child and Dependent Care Credit refundable?

Generally, this credit is nonrefundable, meaning it reduces your tax liability but does not typically result in a refund beyond taxes owed.

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