Tax credit for child-care expenses

January 17, 2022
By Sarah O’Brien -

You can get up to $8,000 back in tax credit for child-care expenses. Here’s what you need to know:


  • For your 2021 tax return, the cap on expenses eligible for the child and dependent care tax credit is $8,000 for one child (up from $3,000) or $16,000 (up from $6,000) for two or more.
  • Depending on your income, you may be able to write off 50% of those expenses.
  • There are instances where you can use this tax credit even if you also have a dependent care flexible spending account.

Last year’s child-care expenses may be worth more at tax time than you realize.

The child and dependent care tax credit, as it’s called, was expanded in several ways for 2021 alongside other tax changes. This means many families will get a bigger tax break and the credit could reach a larger swath of households than it had before. 

“Even if you may not have qualified for it in the past, you may now,” said Henry Grzes, lead manager for tax practice and ethics with the American Institute of CPAs.

The average national cost for an infant in full-time child care is $9,991 annually, according to ValuePenguin research. Generally, the cost of care goes down as the child gets older, although it can still easily run into the thousands of dollars per year depending on where you live and the specific type of care.

The child and dependent care tax credit — which is different from the more familiar child tax credit — generally gives parents some help covering the cost of care for children under age 13 or adult dependents. The expanded version, which was enacted as part of the American Rescue Plan Act last March, is for 2021 only and reverts to the previous rules this year.

The general qualifications didn’t change, however. That is, the credit is only available for dependent care provided so that you could go to work or look for work (or, perhaps, attend school). Generally speaking, you (and your spouse, for joint tax returns) must have earned income during the year to claim the credit. 

Read the original article at CNBC here.

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