Deducting Summer Camps and Daycare with the Child and Dependent Care Credit

If you paid a daycare center, babysitter, summer camp, or other care provider to care for a qualifying child under age 13 or a disabled dependent of any age, you may qualify for a tax credit of up to 35 percent of qualifying expenses of $3,000 ($1,050) for one child or dependent, or up to $6,000 ($2,100) for two or more children or dependents.

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Key Takeaways

Child and Dependent Care Credit for 2023 and 2024

The Child and Dependent Care Credit provides a tax break for many parents who are responsible for the cost of childcare. Though the credit is geared toward working parents or guardians, taxpayers who were full-time students or who were unemployed for part of the year may also qualify.

If you paid a daycare center, babysitter, summer camp, or other care provider to care for a qualifying child under age 13 or a disabled dependent of any age, you may qualify for a tax credit on your 2023 or 2024 taxes of up to 35% of:

For example, a taxpayer with one qualifying person, $3,000 in qualifying expenses and an AGI of $60,000 would qualify for a nonrefundable credit of approximately $600 (20% x $3,000).

Credit temporarily increased for Tax Year 2021 Only

The American Rescue Plan signed into law on March 11, 2021, brought significant changes to the amount and way that the Child and Dependent Care Credit can be claimed only for tax year 2021. The new law not only increases the credit, but also the amount of taxpayers that will benefit from the credit’s highest rate and it also makes it fully refundable. This means that, unlike previous years, you can still get the credit even if you don’t owe taxes.

Changes to the Child and Dependent Care Credit that apply only for tax year 2021 (the taxes you file in 2022) include:

For 2021, the credit phases out as your adjusted gross income (AGI) increases past $125,000. For income levels:

The credit percentage is completely phased out to zero for families with AGIs of $438,000 or more.

Also for tax year 2021, the maximum amount that can be contributed to a dependent care flexible spending account and the amount of tax-free employer-provided dependent care benefits is increased from $5,000 to $10,500.

Purpose of the Child and Dependent Care Credit

The Child and Dependent Care Credit is designed to assist working parents and guardians with some of the expenses involved in raising a child or caring for a disabled dependent. The credit:

TurboTax Tip:

For tax year 2023 and 2024, the maximum amount that can be contributed to a dependent care flexible spending account and the amount of tax-free employer-provided dependent care benefits is $5,000 ($2,500 if married filing separately).

Qualifications for the Child and Dependent Care Credit

You must meet several criteria to qualify for the Child and Dependent Care Credit. To qualify, you must meet all of the following:

Qualifying expenses for the Child and Dependent Care Credit

You may be aware that daycare fees qualify for the Child and Dependent Care Credit, but the IRS actually considers much more than just the cost of daycare for this credit. Qualifying expenses also include:

Keep in mind that expenses related to schooling, tutoring, or overnight camps are not qualifying expenses.

Special circumstances

Since every family is different, the IRS has a series of exceptions to the rules in the qualification process. These exceptions allow a greater number of families to take advantage of the credit.

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