Tax Breaks for Child-Care Expenses
Depending on the number of kids you have, you may be able to take advantage of a dependent-care flexible spending account and the child-care tax credit.
We set aside $5,000 last year in a dependent-care flexible spending account through work to pay for my son’s child-care expenses. However, we ended up with out-of-pocket expenses in excess of $5,000. Can we also take the child-care credit when we file our tax return?
No. Because you are paying for care for only one child younger than age 13, you can’t take the child-care credit for the excess expenses. If, however, you were paying for two or more kids, you would be able to claim the credit on up to $1,000 of child-care expenses beyond the $5,000 covered by your flex plan.
The child-care credit applies to up to $3,000 of child-care expenses for one child or up to $6,000 for two or more. The most you can run through a flex plan, regardless of the number of children involved, is $5,000. So for a family with two or more qualifying children who max out on the flex plan, up to $1,000 of additional expenses could qualify for the credit. Because the credit ranges from 20% to 35% (depending on income), that could knock $200 to $350 off the family’s tax bill.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The cost of a nanny, day care or preschool counts for the child-care credit or a dependent-care FSA, as does the cost of before-school and after-school care and summer day camp for kids younger than 13 if the expense is incurred so that you and your spouse can work. You can also qualify if one spouse is a full-time student and the other is working. For more information about the child-care credit, see Tax Break for Summer Camp.
To calculate the child-care credit you can claim -- whether or not you receive dependent-care benefits from your employer -- see IRS Form 2441. Also see Publication 503, Child and Dependent Care Expenses, especially the “reduced dollar limit” section on page 11 about coordinating the dependent-care FSA and the child-care credit.
-
The Top 10 Side Gigs For Retirees In 2026Money is freedom in retirement; here’s how to earn more of it with a profitable side gig
-
3 Retirement Changes to Watch in 2026: Tax EditionRetirement Taxes Between the Social Security "senior bonus" phaseout and changes to Roth tax rules, your 2026 retirement plan may need an update. Here's what to know.
-
The 'Yes, And...' Rule for RetirementRetirement rarely follows the script. That’s why the best retirees learn to improvise.
-
Tax Season 2026 Is Here: 8 Big Tax Changes to Know Before You FileTax Tips Due to several major tax rule changes, your 2025 return might feel unfamiliar even if your income looks the same.
-
2026 State Tax Changes to Know Now: Is Your Tax Rate Lower?Tax Changes As a new year begins, taxpayers across the country are navigating a new round of state tax changes.
-
3 Major Changes to the Charitable Deduction for 2026Tax Breaks About 144 million Americans might qualify for the 2026 universal charity deduction, while high earners face new IRS limits. Here's what to know.
-
Retirees in These 7 States Could Pay Less Property Taxes Next YearState Taxes Retirement property tax bills could be up to 65% cheaper for some older adults in 2026. Do you qualify?
-
Estate Tax Quiz: Can You Pass the Test on the 40% Federal Rate?Quiz How well do you know the new 2026 IRS rules for wealth transfer and the specific tax brackets that affect your heirs? Let's find out!
-
5 Types of Gifts the IRS Won’t Tax: Even If They’re BigGift Tax Several categories of gifts don’t count toward annual gift tax limits. Here's what you need to know.
-
The 'Scrooge' Strategy: How to Turn Your Old Junk Into a Tax DeductionTax Deductions We break down the IRS rules for non-cash charitable contributions. Plus, here's a handy checklist before you donate to charity this year.
-
Tax Refund Alert: House GOP Predicts 'Average' $1,000 Payouts in 2026Tax Refunds Here's how the IRS tax refund outlook for 2026 is changing and what steps you can take now to prepare.
