Child and Dependent Care Credit FAQs

The child and dependent care credit is a tax credit that may help you pay for the care of eligible children and other dependents (qualifying persons). The credit is calculated based on your income and a percentage of expenses that you incur for the care of qualifying persons to enable you to go to work, look for work, or attend school. For 2021, the American Rescue Plan Act of 2021, enacted March 11, 2021, made the credit substantially more generous (up to $4,000 for one qualifying person and $8,000 for two or more qualifying persons) and potentially refundable, so you might not have to owe taxes to claim the credit (so long as you meet the other requirements). This means that more taxpayers will be eligible for the credit for the first time and that, for many taxpayers, the amount of the credit will be larger than in prior years. However, taxpayers with an adjusted gross income over $438,000 are not eligible for this credit even though they may have previously been able to claim this credit.

The following FAQs can help you learn if you are eligible and if eligible, how to calculate your credit. Further information is found below and in IRS Publication 503, Child and Dependent Care Expenses. For information regarding changes to the credit for 2021 only, see Q6 through Q14.

Claiming the Credit

Q1. Am I eligible to claim the credit? (updated August 24, 2021)

A1. You are eligible to claim this credit if you (or your spouse in the case of a joint return) pay someone to care for one or more qualifying persons in order for you to work or look for work, and your income level is within the income limits set for the credit. If you are married, you must file a joint return to claim the credit. However, if you are legally separated or living apart from your spouse, you may be able to file a separate return and still claim the credit. If you or your spouse was a full-time student, see Q17 and IRS Publication 503, Child and Dependent Care Expenses, for more information on eligibility.

Earned Income Requirement: You (and your spouse in the case of a joint return) must have earned income during the year to claim the credit. See Q16 and Q17 for more information, including special rules that may apply if you are a student or are unable to care for yourself.

Q2. How do I claim the credit? (updated August 24, 2021)

A2. To claim the credit, you will need to complete Form 2441, Child and Dependent Care Expenses, and include the form when you file your Federal income tax return. In completing the form to claim the credit, you will need to provide a valid taxpayer identification number (TIN) for each qualifying person. Generally, this is the social security number for the qualifying person.

You should keep records of your work-related expenses. Also, if your dependent or spouse is not able to take care of himself or herself, your records should show both the nature and length of the disability. Other records you should keep to support your claim for the credit are in IRS Publication 503, Child and Dependent Care Expenses and Q3.

For more information about completing the form and claiming the credit, see the Instructions for Form 2441.

Q3. What information do I need from my care provider to claim the credit? (updated August 24, 2021)

A3. You must identify all persons or organizations that provided care for your child, dependent, or spouse. To identify the care provider, you must give the provider’s name, address, and taxpayer identification number (TIN). You can use Form W-10, Dependent Care Provider’s Identification and Certification, to request this information. If the care provider information you give is incorrect or incomplete, your credit may not be allowed. However, if you can show that you used due diligence in trying to supply the information, you can still claim the credit. For guidance on showing due diligence, see IRS Publication 503, Child and Dependent Care Expenses.

You should keep this information with your tax records. For more information on the record keeping requirements, please see Publication 503, Child and Dependent Care Expenses.

Q4. Who is a qualifying person? (added June 11, 2021)

A4. A qualifying person is:

• Your dependent who is under age 13 when the care is provided;
• Your spouse, if your spouse isn’t mentally or physically able to care for himself or herself and lives with you for more than half the year; and
• A person who isn’t mentally or physically able to care for himself or herself, lives with you for more than half the year, and either:
  • Is your dependent, OR
  • Would have been your dependent except that (i) he or she receives more than a certain gross income amount ($4,300 in 2021), (ii) he or she files a joint return, or (iii) you (or your spouse in the case of a joint return) can be claimed as a dependent on someone else’s return.

  Q5. What does “physically or mentally not able to care for oneself” mean? (added June 11, 2021)

  A5. Persons who can’t dress, clean, or feed themselves because of physical or mental problems are considered not able to care for themselves. Persons who must have constant attention to prevent them from injuring themselves or others also are considered not able to care for themselves.

  Q6. For 2021, what percentage of my work-related expenses are allowed as a credit? (updated August 24, 2021)

  A6. The percentage of your work-related expenses allowed as a credit depends on your income (and your spouse’s income in the case of a joint return). The maximum percentage of your work-related expenses allowed as a credit for 2021 is 50 percent. The 2021 Instructions for Form 2441 and IRS Publication 503, Child and Dependent Care Expenses for 2021 both will contain a chart indicating the percentage of work-related expenses allowed as a credit at each income level. The IRS anticipates that the 2021 Instructions for Form 2441 and the 2021 Publication 503 will be available in January 2022.

  Q7. Can this 50-percent amount of work-related expenses for 2021 be reduced? (updated August 24, 2021)

  A7. Yes. The amount of your adjusted gross income determines the percentage of your work-related expenses that you are allowed as a credit. For this purpose, your income is your “adjusted gross income” shown on your Form 1040, 1040-SR, or 1040-NR.

  For 2021, the 50-percent amount begins to phase out if your adjusted gross income is more than $125,000, and completely phases out if your adjusted gross income is more than $438,000. For more information on the percentage applicable to your income level, please refer to the 2021 Instructions for Form 2441 or IRS Publication 503, Child and Dependent Care Expenses for 2021. The IRS anticipates that the 2021 Instructions for Form 2441 and the 2021 Pub. 503 will be available in January 2022.

  Q8. For 2021, is there a limit on the amount of work-related expenses I can take into account in calculating the credit? (updated August 24, 2021)

  A8. Yes. The maximum amount of work-related expenses you can take into account for purposes of the credit is $8,000 if you have one qualifying person, and $16,000 if you have two or more qualifying persons. This means that the maximum total amount of the credit is $4,000 (50 percent of $8,000) if you have one qualifying person, and $8,000 (50 percent of $16,000) if you have two or more qualifying persons.

  Earned Income Limitation: The amount of work-related expenses that can be taken into account in calculating the credit cannot exceed your earned income. If you are married and filing a joint return, the work-related expenses you can take into account are limited to the lesser of your or your spouse’s earned income. See Q16 and Q17 for more information about exceptions to the earned income rule for married joint filers.

  Q9. I have two qualifying persons. In 2021, I incurred more than $16,000 in work-related expenses for the care of one of them, and none for the other. Am I subject to the higher $16,000 work-related expenses limitation for two or more qualifying persons, even though my expenses were only for the care of one qualifying person? Or am I subject to the lower $8,000 work-related expenses limitation for one qualifying person? (added August 24, 2021)

  A9. Because you have two or more qualifying persons, you are subject to the higher $16,000 work-related expense limitation, regardless of how the expenses are allocated among the qualifying persons.

  Q10. For 2021, can I take the full credit even if my credit exceeds the amount of taxes I owe? (added June 11, 2021)

  A10. Yes. For 2021, the credit is refundable for eligible taxpayers. This means that even if your credit exceeds the amount of Federal income tax that you owe, you can still claim the full amount of your credit, and the amount of the credit in excess of your tax liability can be refunded to you.

  Q11. What do I need to do for the credit to be refundable for 2021? (added August 24, 2021)

  A11. You must pay the work-related expenses incurred in 2021 by December 31, 2021, and meet the special residency requirements for the credit to be refundable for 2021. See Q12 for more information about the residency requirements.

  Q12. What are the special residency requirements for the refundable portion of the credit? (updated August 24, 2021)

  A12. To be eligible for the refundable portion of the credit for 2021, you (or your spouse in the case of a joint return) must have your main home in one of the 50 states or the District of Columbia for more than half of the tax year. Your main home can be any location where you regularly live. Your main home may be your house, apartment, mobile home, shelter, temporary lodging, or other location and doesn’t need to be the same physical location throughout the taxable year. If you are temporarily away from your main home because of illness, education, business, vacation, or military service, you are generally treated as living in your main home during that time.

  Special Exception for Military Personnel: For U.S. military personnel stationed outside of the United States, see Q15.

  Q13. If I live in American Samoa, the Commonwealth of the Northern Mariana Islands, Guam, Puerto Rico, or the U.S. Virgin Islands in 2021, can I claim the credit if I’m otherwise eligible? (updated August 24, 2021)

  A13. In many cases, the answer is yes. However, the credit must be claimed from your local territory tax agency and not from the IRS. Furthermore, special rules apply to these five U.S. territories. Please contact your local territory tax agency for information about availability and your eligibility for the credit in 2021.

  Q14. For more than half of 2021, I will live overseas, but not in one of the five U.S. territories. Can I claim the refundable credit on my 2021 tax return? (updated August 24, 2021)

  A14. Generally, no. While you can claim the credit to offset your tax liability, the credit is refundable only if you (or your spouse in the case of a joint return) have your main home in one of the 50 states or the District of Columbia for more than half of the tax year. Your main home can be any location where you regularly live. Your main home may be your house, apartment, mobile home, shelter, temporary lodging, or other location and doesn’t need to be the same physical location or in the same state throughout the taxable year. If you are temporarily away from your main home because of illness, education, business, vacation, or military service, you are generally treated as living in your main home.

  Special Exception for Military Personnel: For an exception to this answer regarding U.S. military personnel stationed outside of the United States, see Q15.

  Q15. My main home is in one of the 50 states or the District of Columbia, and I am in the U.S. military and stationed outside the United States for an extended period of time. Am I treated as living in my main home during that time for purposes of the credit? (added June 11, 2021)

  A15. Yes. U.S. military personnel who are stationed outside the United States on extended active duty are considered to have their main home in one of the 50 states or the District of Columbia for purposes of qualifying for the refundable portion of the credit. For this purpose, “extended active duty” means any period of active duty pursuant to a call or order to active duty for a period in excess of 90 days or for an indefinite period.

  Q16. My spouse was out of work during the year. Can we still claim this credit? (updated August 24, 2021)

  A16. Maybe. Your spouse who is out of work during the year must be actively looking for employment, and the work-related expenses must be incurred so that you and your spouse can work or look for work as discussed in Q18. You (and your spouse in the case of a joint return) must have earned income to claim the credit. Earned income includes wages, salaries, tips, other taxable employee compensation, and net earnings from self-employment. A net loss from self-employment reduces earned income. Earned income also includes any strike benefits and disability pay you report as wages. Unemployment compensation is not included in earned income.

  The amount of work-related expenses that can be taken into account in calculating the credit cannot exceed your earned income. If you are married and filing a joint return, your work-related expenses on your joint return are limited to the lesser of your or your spouse’s earned income. See Q17 for special rules that may apply if you are a student or unable to care for yourself.

  Q17. My spouse was a student or unable to care for herself during the year and did not work. Can we still claim this credit? (added June 11, 2021)

  A17. Maybe. There are special earned income rules for students and those mentally or physically incapable of caring for themselves. If you (or your spouse in the case of a joint return) are a full-time student or are mentally or physically incapable of caring for yourself, you will be treated as having earned income of $250 if you have one qualifying person (or $500 for two or more qualifying persons) for any month you are a full-time student or not able to care for yourself.

  Important: If in the same month you and your spouse both did not work and were either full-time students or not physically or mentally capable of caring for yourselves, only one of you can be treated as having earned income in that month.