Qualifying expenses
Daycare, after-school programs, day camps, and in-home care. Up to $3,000 per child (or $6,000 for two or more). Both spouses must have earned income. The care must exist so you can work or look for work; care during a non-working spouse's free afternoon doesn't qualify unless that spouse is a full-time student or disabled, in which case the rules deem them earned income.
Who counts as a qualifying person
A child under 13 when the care was provided, a spouse who is physically or mentally incapable of self-care, or another dependent who can't care for themselves and lives with you more than half the year. The under-13 rule is by date of care, not year-end: expenses stop qualifying on the thirteenth birthday, mid-year.
The provider information requirement
Form 2441 requires the care provider's name, address, and taxpayer identification number. A daycare center provides its EIN; an individual babysitter provides an SSN. Paying a sitter in cash doesn't remove the requirement, and a provider who won't give a tax ID is telling you the income isn't being reported, which becomes your filing problem. Collect a completed W-10 from every provider before year-end.
FSA coordination
Dependent Care FSA ($5,000 max pre-tax) and the credit can stack. FSA reduces the expense base eligible for the credit. We model which combination saves more. For one child, an FSA typically wins at higher incomes; with two or more children and $6,000 of expense base, running the remaining $1,000 through the credit on top of a full FSA captures both.
The percentage and where it's heading
The credit percentage slides with income, from 35% at the bottom down to 20% for most middle and upper incomes. Legislation enacted in 2025 raised the top percentage beginning with 2026 returns, making the credit richer for lower-income households going forward. The credit remains nonrefundable: it offsets tax owed, and no more.
Common questions
- Does summer camp count?
- Day camp yes. Overnight camp no. Cost of camp for children under 13 while parents work qualifies.
- Can I pay a grandparent and claim the credit?
- Yes, if the grandparent isn't your dependent and isn't your child under 19. Their name, address, and SSN go on Form 2441, and the payments are taxable income to them.
- Is private school tuition a qualifying expense?
- Kindergarten and above, no; that's education, not care. Before-school and after-school care programs at the same school do qualify, so ask the school to invoice them separately.
- What if I can't get my provider's tax ID?
- Document your attempts (a written request is enough) and the credit can still be claimed with an explanation. It slows processing, so the W-10 up front is always the better path.
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