The Child Tax Credit (CTC) and the Child and Dependent Care Credit (CDCC) are two distinct tax credits designed to help families, but they cover different types of expenses.
What is the Child and Dependent Care Credit (CDCC)?
The Child and Dependent Care Credit is a non-refundable tax credit aimed at helping working individuals pay for care provided to their dependents.
The credit is designed to offset the cost of care that allows the taxpayer (and their spouse, if filing jointly) to work or actively look for work. This effectively reduces your tax liability dollar-for-dollar.
Who Qualifies for the Child and Dependent Care Credit?
You may qualify for this credit if you paid expenses for care that allowed you to work or look for work, and the care was provided to a qualifying person.
A Qualifying Person includes:
- A child under the age of 13 when the care was provided.
- A spouse who is physically or mentally incapable of self-care and lived with you for more than half the year.
- A dependent (other than your spouse) who is physically or mentally incapable of self-care and lived with you for more than half the year.
Key Eligibility Requirements:
- Work-Related Expense: You (and your spouse, if filing jointly) must have earned income from work or be actively looking for work.
- Joint Filing: If you are married, you must file a Joint Tax Return to claim the credit (with very limited exceptions).
- Care Provider Information: You must provide the name, address, and Taxpayer Identification Number (TIN) or Employer Identification Number (EIN) of the care provider on your tax return.
How Much Credit Can You Get?
The credit is based on a percentage of your allowable care expenses, up to a maximum amount.
| Number of Dependents | Maximum Qualified Expenses | Credit Percentage Range |
| One Dependent | $3,000 | 20% to 35% |
| Two or More Dependents | $6,000 | 20% to 35% |
The actual percentage of expenses you can claim (from 20% to 35%) is determined by your Adjusted Gross Income (AGI).
Families with lower AGIs can claim the maximum 35% of their expenses.
The percentage gradually decreases, with families having an AGI over $43,000 claiming the minimum 20%.
What Expenses Qualify for the CDCC?
The expense must be for the well-being and protection of the qualifying person.
Qualifying Expenses Typically Include:
✔️ Daycare or Child Care Centers
✔️ Babysitters or Nannies (paid for their care duties)
✔️ Nursery School or Preschool tuition (expenses attributable to care, not schooling)
✔️ Summer Day Camps (but not overnight camps)
✔️ Home Care for a dependent or spouse with special needs.
How to Claim the Credit?
To claim the Child and Dependent Care Credit when you file your annual tax return, you must complete and attach IRS Form 2441, Child and Dependent Care Expenses, to your Form 1040. You will need to provide detailed information about your care expenses and the provider.