Expanded Child and Dependent Care Credit

The tax code has a credit for dependent-care expenses for children under age 13

when the care was provided, and it also can apply to expenses for others of any

age who are incapable of caring for themselves—such as an elderly relative.

In most years—including 2022—many filers get a credit for 20% of up to $3,000 of

eligible expenses for one dependent, or up to $6,000 of expenses for two or more.

For very low earners, the credit can be as high as 35% of these expenses.

Just for 2021, however, Congress greatly expanded the child- and dependent-care

credit by raising the credit’s top rate to 50% and increasing the allowed expenses

to $8,000 for one dependent and $16,000 for two or more. It also made this credit

refundable, so filers can receive a payment even if they don’t owe income taxes.

The expansion often applies to expenses for care of non-child dependents as well.

For example, say that a worker incurred $16,000 of eligible child-care

expenses for two young children last year. In this case, this worker could take the dependent-care tax credit on the $16,000 of expenses. The expanded credit could reduce the worker’s 2021 taxes by up to $8,000, depending on income.