Child and Dependent Care Tax Credit 2026: How It Works

The Child and Dependent Care Credit equals a percentage (20% to 35%) of qualifying expenses, depending on your adjusted gross income (AGI). Expense limits are $3,000 for one qualifying person and $6,000 for two or more. At lower income levels (AGI under $15,000), the credit rate is 35%.

The rate gradually decreases as income rises, reaching 20% for AGI over $43,000.

At 20% with $6,000 in expenses for two children, the maximum credit is $1,200.

For families with multiple children, this credit combined with the child care tax deductible Child Tax Credit can provide meaningful federal tax relief — though both credits are subject to separate income and eligibility rules.

A qualifying person for this credit is: a child under age 13 whom you can claim as a dependent; your spouse if physically or mentally unable to care for themselves; or a dependent who is physically or mentally unable to self-care, regardless of age, if you can claim them as a dependent (or would be able to except for the income test).

Note that child support tax deductible rules are entirely separate — child support payments do not qualify as care expenses for this credit, and the credit is independent of whether the child resides with the payer or recipient of support.

Qualifying expenses include payments to daycare centers, licensed family daycare providers, babysitters, au pairs, after-school programs, and similar care providers that allow you to work or actively look for work.

The care provider cannot be your spouse, the qualifying person's parent, a dependent you claim, or your child under age 19.

Day camps qualify; overnight camps do not.

Note that the IRS explicitly excludes tuition for K–12 education from qualifying expenses — for tax benefits related to education costs, see our guide on whether private school tuition is tax deductible.

If your employer offers a Dependent Care Flexible Spending Account (FSA), you can contribute up to $5,000 pre-tax per household per year.

FSA contributions reduce the qualifying expense base for the credit dollar-for-dollar.

For many middle-income workers with two or more children, the FSA provides more tax benefit than the credit due to the income-based phase-down of the credit percentage.

When planning your total benefits strategy, also consider how much to contribute to your 401(k) alongside FSA elections, as both reduce your taxable income.

Families building toward longer-term financial goals should also review retirement savings goals to balance current childcare costs with future security.