Can I claim the Child and Dependent Care Credit for daycare costs?

by | May 9, 2025 | Individual Taxes, Tax Credits

Question : Can I claim the Child and Dependent Care Credit for daycare costs?

Here’s what HIVE AI had to say about “Can I claim the Child and Dependent Care Credit for daycare costs?”:

Child and Dependent Care Credit for Daycare Costs

Yes, you can claim the Child and Dependent Care Credit for daycare costs if you meet certain eligibility requirements. This credit helps offset the cost of care for qualifying individuals while you (and your spouse, if filing jointly) work or look for work.

Eligibility Requirements

To qualify for the Child and Dependent Care Credit, you must meet several criteria:

  • Work Requirement: You (and your spouse, if filing jointly) must have earned income from work during the year. The credit is designed to help working parents or those actively looking for work You may be able to claim the child and dependent care credit if you paid expenses for the care of a qualifying individual to enable you (and your spouse, if filing a joint return) to work or actively look for work. Generally, you may not take this credit if your filing status is married filing separately. IRS.gov Tax Topics
  • Purpose of Care: The care must be necessary 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. IRS – Child and Dependent Care Credit FAQs
  • Qualifying Person: The care must be for a qualifying individual, which includes:
    • Your dependent child under age 13 Section 21 allows a credit to taxpayers with respect to whom there are one or more “qualifying individuals” equal to a percentage of the “employment-related expenses” paid by the taxpayer during the taxable year. For purposes of section 21 a “qualifying individual” includes a dependent (as defined in section 152(a)(1)) who has not attained age 13. Dawson U.S. Tax Court Opinions: Jackson M. Browning
    • Your spouse or dependent who is physically or mentally incapable of self-care and lives with you for more than half the year
  • Filing Status: Generally, you may not take this credit if your filing status is married filing separately. However, see What’s Your Filing Status? in Publication 503, Child and Dependent Care Expenses, which describes an exception for certain taxpayers living apart from their spouse and meeting other requirements. IRS.gov Tax Topics
  • Provider Identification: No credit shall be allowed under subsection (a) for any amount paid to any person unless— (A) the name, address, and taxpayer identification number of such person are included on the return claiming the credit, or (B) if such person is an organization described in section 501(c)(3) and exempt from tax under section 501(a), the name and address of such person are included on the return claiming the credit. In the case of a failure to provide the information required under the preceding sentence, the preceding sentence shall not apply if it is shown that the taxpayer exercised due diligence in attempting to provide the information so required. IRC § 21(e)

Qualifying Expenses

The following guidelines are used to determine if the taxpayer qualifies for the Child and Dependent Care Credit: The limit on the amount of qualifying expenses that can be considered in computing the credit is $3,000 for one qualifying person or $6,000 for two or more qualifying persons. IRS IRM 4.19.15 Discretionary Programs These expenses include:

  • Daycare centers
  • Babysitters
  • Before or after-school care
  • Day camps (not overnight camps)
  • Nursery schools

The total expenses that you may use to calculate the credit may not be more than $3,000 (for one qualifying individual) or $6,000 (for two or more qualifying individuals). Expenses paid for the care of a qualifying individual are eligible expenses if the primary reason for paying the expense is to assure the individual’s well-being and protection. If you received dependent care benefits that you exclude or deduct from your income, you must subtract the amount of those benefits from the dollar limit that applies to you. IRS.gov Tax Topics

What Doesn’t Qualify

Not all child-related expenses qualify for the credit. For example:

My spouse and I both work and are eligible for the child and dependent care credit. May I include my 5-year-old son’s private kindergarten tuition as a qualified expense on Form 2441, Child and Dependent Care Expenses? Answer: No, tuition for kindergarten isn’t a qualifying expense for the child and dependent care credit because expenses to attend kindergarten or a higher grade are educational expenses rather than childcare expenses. However, the expenses for a before- or after-school care program of a child in kindergarten or a higher grade may qualify, even though the expense of school tuition doesn’t qualify. IRS.gov FAQ

Credit Amount

The amount of qualifying expenses after applying the limit is reduced by the aggregate amount of dependent care assistance excludable from gross income for the tax year. The credit can be as much as 35 percent of qualifying expenses. Refer to Form 2441, Child and Dependent Care Expenses, for computation. IRS IRM 4.19.15 Discretionary Programs

The percentage of expenses allowed as a credit depends on your adjusted gross income (AGI). The higher your income, the lower the percentage (ranging from 35% down to 20% for most tax years).

Special Considerations

  • Divorced or Separated Parents: A child does not have to be claimed as an exemption to qualify for Child and Dependent Care Credit or to be a qualifying EIC Child. Exemptions are not involved in the computation of Child and Dependent Care Credit or EIC. Enter C in the Clear Field when the taxpayer does not claim an exemption for the dependent(s) (Field 01EXC) but claims Child Care Credit and/or EIC. IRS IRM 3.12.3 Individual Income Tax Returns
  • Identifying Information Required: No credit shall be allowed under this section with respect to any qualifying individual unless the TIN of such individual is included on the return claiming the credit. IRC § 21(e)
  • Employment-Related Expenses: Petitioners have demonstrated that they were both employed during the years in issue and their employment made it necessary for them to pay child care expenses for their qualifying children. Thus, on the basis of the entire record, we hold that petitioners are entitled to the dependent care credit with respect to the substantiated amounts of expenses they paid for the care of their qualifying children. Dawson U.S. Tax Court Opinions: Mayer & Sarah Weinberger
  • Substantiation Requirements: Substantiated Employment-Related Expenses Petitioners provided sufficient documentary evidence to substantiate a portion of the employment-related expenses they paid during each year. Dawson U.S. Tax Court Opinions: Mayer & Sarah Weinberger You must be able to document the expenses you claim.

How to Claim the Credit

To claim the Child and Dependent Care Credit:

Credit WAS NOT claimed on the original return | N/A | Advise taxpayer to file an amended return and include Form 2441. IRS IRM 21.6.3 Credits If you didn’t claim the credit on your original return but realize you qualify, you can file an amended return.

Documentation Needed

Keep records of:

  • Care provider’s name, address, and tax identification number
  • Amounts you paid for care
  • Dates of service
  • Receipts or proof of payment

Claims “due diligence” was used to secure the provider’s TIN | The provider’s TIN still cannot be secured | Follow the guidelines in Publication 503, Child and Dependent Care Expenses, for Provider Identification Test. If due diligence is established, allow the credit. IRS IRM 21.6.3 Credits If you can’t get the provider’s TIN despite reasonable efforts, you may still qualify for the credit if you can show you exercised “due diligence” in attempting to obtain this information.

Conclusion

The Child and Dependent Care Credit can provide valuable tax relief for working parents and caregivers. Remember that this is a non-refundable credit for most tax years (except for 2021 when it was temporarily made refundable), meaning it can reduce your tax liability to zero but won’t result in a refund beyond that.

Be sure to keep detailed records of your childcare expenses throughout the year, including receipts and provider information, to substantiate your claim for this credit.

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