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$8000 Child and Dependent Care Credit: Am I eligible? How do I apply?

The extra support for families means 50 percent of child care expenses can be covered by the IRS, providing further reprieve with the Child Tax Credit.

A child joins students during a state-wide walkout demanding justice for Amir Locke a Black man who was shot and killed by Minneapolis police, in St. Paul, Minnesota.
Tim EvansReuters

Americans who care for children or those who are unable to care for themselves could be eligible for a hefty tax cut when they file their tax returns this year.

The Child and Dependent Care Credit (CDCC) has been nearly quadrupled allowing taxpayers to write off a portion of up to $8,000 for one child or dependent and $16,000 for two or more of those expenses. Taxpayers can now claim up to 50 percent of those expenses in the credit up to a certain eligibility income threshold. Additionally, only for 2021, some who have no income but “work” will now be eligible.

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How do I apply?

To apply, complete Form 2441, Child and Dependent Care Expenses and attach to your 2022 tax return.

On your form you need to identify all persons or organizations that provide care for your child or dependent. Information provided includes name, address, and either the social security number or the employer identification number of the care provider on your return.

You can use Form W-10, Dependent Care Provider's Identification and Certification to request information from the care provider.

Am I eligible?

Individuals or households with earnings up to $125,000 will be able to claim 50 percent of up to $8,000 paid toward having their one child or dependent cared for, so a maximum credit of $4,000. In 2021 it will also be fully refundable, which means that if you owe less in taxes than the amount of the credit you can claim, you will receive the excess as a tax refund.

Above the $125,000 threshold the credit amount begins to phase out by one percent off the starting 50 percent for every $2,000, or fraction thereof, over the threshold. The percentage drops to 20 percent when income reaches $183,000.

That 20 percent of expenses you can claim as the credit lasts until household income reaches a maximum of $400,000. Above that threshold the credit again starts to phase out until any amount over $438,000 will reduce the credit to $0.

Also, just for this year, if you earn less than the credit you are claiming you can still receive the credit. This is an important change for 2021 in the American Rescue Plan, where for example, if one spouse is a full-time student with no income, the married couple can still get the credit.