How the credit is calculated
The One Big Beautiful Bill Act raised the top rate from 35% to 50% starting with the 2026 tax year. The $3,000 and $6,000 expense limits didn’t change.
For Single and Head of Household filers:
| AGI | Credit Rate |
|---|---|
| $0–$15,000 | 50% |
| $15,000–$45,000 | Phases 50% → 35% |
| $45,000–$75,000 | 35% |
| $75,000–$105,000 | Phases 35% → 20% |
| Above $105,000 | 20% |
For Married Filing Jointly:
| AGI | Credit Rate |
|---|---|
| $0–$15,000 | 50% |
| $15,000–$45,000 | Phases 50% → 35% |
| $45,000–$150,000 | 35% |
| $150,000–$210,000 | Phases 35% → 20% |
| Above $210,000 | 20% |
Say you have two kids in daycare and pay $6,000 a year. At the 50% rate, that’s $6,000 x 0.50 = $3,000 back.
Who counts as a qualifying dependent
A qualifying person is a child under 13, or a spouse or dependent of any age who can’t care for themselves and lives with you more than half the year.
What expenses qualify
- Daycare, preschool, and before- or after-school care
- Summer day camp (overnight camp doesn’t count)
- A nanny or babysitter you hired so you could work or look for work
Tutoring, private school tuition, and entertainment don’t qualify, even if a caregiver is involved.
Dependent Care Tax Credit vs. dependent care FSA
If your employer offers a dependent care flexible spending account (FSA), you can set aside pretax pay for care costs, now up to $7,500 for 2026. Keep in mind: every dollar you put into the FSA reduces, dollar for dollar, the expenses you can claim for the credit. As a rule of thumb, lower-income households tend to come out ahead with the credit, while higher earners usually benefit more from the FSA’s payroll tax savings.
Child and Dependent Care Tax Credit vs. Child Tax Credit
The Child Tax Credit (CTC) pays up to $2,200 per qualifying child regardless of care costs. The dependent care credit specifically reimburses what you paid so you could work. Many families claim both in the same year.
How to claim it
- File Form 2441 with your Form 1040.
- List each care provider’s name, address, and taxpayer ID number.
- The credit is reported on Schedule 3.
