Dependent Care Benefits and the Child Care Tax Credit

Dependent Care Benefits

Child and Dependent Care Credit

A tax credit for expenses paid to care for a qualifying person so you (and your spouse) can work.

Qualifying persons:

• Children under age 13
• Disabled spouse
• Disabled dependent of any age

Maximum qualifying expenses:

• $3,000 for one person
• $6,000 for two or more

Credit percentage: 20–35% based on income

Dependent Care FSA

• Pre-tax contribution through employer: up to $5,000/year ($2,500 if MFS)
• Reduces taxable income dollar-for-dollar
• Must use funds by the plan year deadline (use-it-or-lose-it)

Coordinating FSA and Credit

You cannot count the same expenses for both the FSA and the credit.

• If you contribute $5,000 to a FSA, your maximum qualifying expenses for the credit are reduced accordingly

Qualifying Expenses

• Daycare centers
• After-school programs
• Summer day camps
• In-home sitters (babysitters, au pairs)
• Before-school programs

What Doesn't Qualify

• Overnight camps
• Kindergarten and beyond (education, not childcare)
• Payments to a dependent or your child under age 19

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Paying for childcare? Make sure you're using every available tax benefit.