Can You Deduct Child Care Expenses on Your Taxes?

You can’t deduct child care expenses on your taxes, but you can claim a federal tax credit for them, which is usually the better deal anyway. A deduction only reduces the income you’re taxed on; the Child and Dependent Care Credit reduces your tax bill directly, dollar for dollar. It’s worth up to $1,050 if you paid for care for one qualifying person and up to $2,100 for two or more. You claim it on IRS Form 2441, attached to your Form 1040.

Who Can Claim the Credit

Two things have to be true: someone in your household qualifies as a person who needs care, and you (and your spouse, if married) had earned income during the year.

A Qualifying Person

A qualifying person is most often your child under age 13 at the time care was provided. It can also be a spouse or dependent of any age who is physically or mentally unable to care for themselves. Either way, that person must have shared your home for more than half the year.¹

Earned Income

You need wages, salary, tips, or net self-employment earnings during the year. Married couples filing jointly generally both need earned income. If one spouse was a full-time student or unable to care for themselves, that spouse is treated as earning $250 a month with one qualifying person, or $500 a month with two or more.¹

Filing Status

Married couples usually must file jointly to claim the credit. There’s a narrow exception if your spouse did not live in the home during the last six months of the year, your home was the qualifying person’s main home for more than half the year, and you paid more than half the cost of keeping up the home.²

Divorced or Separated Parents

Only the custodial parent can claim this credit. That holds even when the noncustodial parent claims the child as a dependent under a release-of-exemption agreement. The credit follows custody, not the dependency claim.³

Which Expenses Count

Care expenses qualify only if they let you work or look for work, and their main purpose is the well-being and protection of the qualifying person.²

Common qualifying costs include nursery school, preschool, licensed daycare, and in-home care from a babysitter or nanny. Day camp during summer or school breaks counts. If you employ a housekeeper who also looks after your child, the caregiving share of their pay qualifies.⁴

What doesn’t count: tuition for kindergarten or higher grades, even when the school offers after-hours supervision. Overnight camp is out regardless of the child’s age. Transportation only counts if the provider handles it; driving your child to daycare yourself is not a qualifying expense.²

Paying a Relative

You can pay a relative and still claim the credit, but not every relative qualifies. Payments don’t count if they go to your spouse, your child under age 19 (even if not your dependent), anyone you claim as a dependent, or the other parent of your qualifying child if that child is under 13. Payments to a grandparent, aunt, uncle, or adult sibling outside those categories are fine.³

How the Credit Is Calculated

Two numbers drive the math. First, there’s a cap on the expenses you can count: up to $3,000 for one qualifying person, or $6,000 for two or more. These are the expense ceilings, not the credit itself.⁵ Second, the IRS multiplies your qualifying expenses by a percentage tied to your adjusted gross income. The percentage runs from 35% at AGI under $15,000 down to 20% for AGI over $43,000, dropping one point for every $2,000 of income above $15,000.⁶

Some worked examples:

One qualifying person, AGI under $15,000: $3,000 × 35% = $1,050
One qualifying person, AGI over $43,000: $3,000 × 20% = $600
Two or more, AGI under $15,000: $6,000 × 35% = $2,100
Two or more, AGI over $43,000: $6,000 × 20% = $1,200

The Credit Is Nonrefundable

This catches families off guard. The credit can bring your federal tax bill down to zero, but it can’t push it below that. If you owe $400 in tax and calculate a $600 credit, you get $400 in relief and the other $200 is gone. Households with very low tax liability get the least benefit from it.⁷

If You Use a Dependent Care FSA

Many employers offer a dependent care flexible spending account, which lets you set aside pre-tax dollars for care. For 2026, the household contribution limit is $7,500, or $3,750 if married filing separately.⁸

The two benefits don’t stack cleanly. Any dependent care benefits you exclude from income through the FSA reduce your $3,000 or $6,000 expense ceiling for the credit, dollar for dollar.⁵ If you have two children, put $6,000 into a DCFSA, and spend $8,000 on care, your credit ceiling drops from $6,000 to zero. For most families earning above $43,000, the FSA is the larger tax benefit anyway, because it shelters income from both income tax and payroll taxes while the credit is only 20% at that income level. FSA benefits still have to be reported on Part III of Form 2441 even if no credit ends up being claimed.⁹

How to Claim It on Form 2441

Attach Form 2441 to your Form 1040 or 1040-SR.⁹ Part I asks for each care provider’s name, address, and taxpayer identification number — Social Security Number for an individual, EIN for a business.² The IRS matches this against the provider’s own filings, so the numbers need to be right. Part II lists each qualifying person and the expenses paid for them. Part III captures any employer-provided dependent care benefits and has to be completed first if that applies, because those benefits reduce the expenses you can use in Part II.

If You Hire a Caregiver in Your Home

Claiming the credit is only half the story when the caregiver works in your house. Pay a nanny, babysitter, or other household employee $3,000 or more in cash wages during 2026 and you become a household employer. That means withholding and paying Social Security and Medicare taxes on those wages. Pay household employees $1,000 or more in cash wages in any calendar quarter and you also owe federal unemployment (FUTA) tax.¹⁰ These are reported on Schedule H, filed alongside your Form 1040 and Form 2441.¹¹ Skipping them is a common mistake that tends to surface later, with interest and penalties.

State Child Care Credits

Roughly half the states offer their own child care tax credit on top of the federal one. State credits are typically calculated as a percentage of the federal credit, running anywhere from 5% to 100% of the federal amount. Some are refundable even though the federal credit isn’t, which can matter for lower-income families. Check your state’s income tax instructions to see what’s available and whether claiming the federal credit is a prerequisite.

1
Office of the Law Revision Counsel. 26 USC 21 – Expenses for Household and Dependent Care Services Necessary for Gainful Employment
2
Internal Revenue Service. Publication 503 – Child and Dependent Care Expenses
3
Internal Revenue Service. Topic No. 602, Child and Dependent Care Credit
4
Internal Revenue Service. Child and Dependent Care Credit FAQs
5
Office of the Law Revision Counsel. 26 USC 21 – Expenses for Household and Dependent Care Services Necessary for Gainful Employment
6
Internal Revenue Service. Instructions for Form 2441
7
Internal Revenue Service. Tax Credits for Individuals
8
FSAFEDS. Dependent Care FSA
9
Internal Revenue Service. Instructions for Form 2441
10
Internal Revenue Service. Publication 926, Household Employer’s Tax Guide
11
Internal Revenue Service. About Schedule H (Form 1040), Household Employment Taxes