How to Claim Daycare on Taxes: Form 2441, FSAs, and Nannies

To claim daycare on your taxes, you file IRS Form 2441 with your Form 1040 and take the Child and Dependent Care Credit. The credit returns 20% to 35% of what you paid for care while you worked, but only up to $3,000 in expenses for one qualifying child or $6,000 for two or more.¹ That puts the maximum credit between $600 and $2,100 depending on your income, well below what most families actually spend on full-time care.

Who Can Claim the Credit

Three things have to line up: a qualifying person, earned income, and an eligible filing status.

The child must have been under 13 when the care was provided. Once they turn 13 mid-year, only the expenses paid before that birthday count.² A spouse or dependent of any age who cannot physically or mentally care for themselves and who lives with you more than half the year also qualifies.

You (and your spouse, if married filing jointly) need earned income during the year, and the care has to exist so you can work or look for work.³ For couples, eligible expenses cannot exceed the lower earner’s income. If one spouse earned $4,000 and the other earned $60,000, only $4,000 in expenses feeds the credit, no matter what you actually paid.²

Filing status matters too. Single, head of household, qualifying surviving spouse, and married filing jointly all work. Married filing separately generally does not, apart from a narrow exception for spouses who lived apart for the last six months of the year.¹

Which Payments Qualify

Daycare centers, in-home babysitters, nannies, au pairs, before-school and after-school programs, and day camps all count, including specialty camps for sports or computers.² Preschool and nursery school tuition qualifies in full.

Several common expenses do not. Overnight camp is out, no matter how much you needed it for work. Summer school and tutoring are treated as education, not care. And once your child starts kindergarten, the tuition for the school day itself stops qualifying, though before-school and after-school care for that same child still counts.²

Who You Can Pay

The provider can be a daycare center, a neighbor, a nanny, or a relative, but the IRS excludes payments to your spouse, to the parent of your qualifying child (if that child is under 13), to your own child who is under 19, or to anyone you or your spouse claims as a dependent.¹ Paying your 17-year-old to watch a younger sibling doesn’t generate a credit. Paying your 20-year-old who isn’t your dependent does.

How Much the Credit Is Worth

Start with your expenses, capped at $3,000 for one qualifying person or $6,000 for two or more.¹ These caps have not been adjusted for inflation in over two decades. If you spend $18,000 on daycare for two children, only $6,000 enters the calculation.

Then apply the income percentage. It begins at 35% for households earning $15,000 or less, drops one point for every additional $2,000 in adjusted gross income, and floors at 20% once AGI passes $43,000.⁴ The 20% rate stays at 20% at every income level above that, with no further phaseout.

Most dual-income families with young children sit at the 20% rate. That means a top credit of $600 for one child or $1,200 for two or more. A single parent earning $22,000 hits a 31% rate, producing up to $930 for one child or $1,860 for two.

It’s Nonrefundable

The credit can zero out your federal income tax but it will not create a refund on its own. If your liability is already low, perhaps because the Child Tax Credit ate it first, the care credit may be worth less than the calculated amount, or nothing. The refundable version briefly available for 2021 under the American Rescue Plan is gone.

Filling Out Form 2441

Form 2441 attaches to your Form 1040 or 1040-SR.⁴ Tax software fills it in for you, but you still need the underlying information.

Part I: The Care Provider

For each provider you need a name, address, and taxpayer identification number (SSN, ITIN, or EIN). Form W-10 is designed for requesting this from providers.⁵ For a tax-exempt organization such as a church-run program, write “Tax-Exempt” in the ID field.

If a provider refuses to give you their number, you can still claim the credit by reporting the information you have and attaching a statement showing you asked. The missing number will block e-filing, so you’ll need to submit a paper return.⁵

Part II: The Qualifying Person and the Math

List each qualifying child or dependent by name and Social Security number. These must match Social Security Administration records exactly; a mismatch triggers a reduction or denial of the credit.⁵ Enter what you paid each provider, then work through the expense cap and income percentage.

Part III: Dependent Care Benefits

If your employer paid dependent care benefits through an FSA or similar program, complete Part III before Part II. This section determines how much of the benefit is excludable from your income and reduces the expenses available for the credit.⁵ Even if no credit remains after applying the FSA, file Form 2441 to report the exclusion correctly.

If You Also Use a Dependent Care FSA

For 2026, the dependent care FSA exclusion rose to $7,500 (up from $5,000), or $3,750 if married filing separately.⁶ The increase came from the One Big Beautiful Bill Act, effective for tax years beginning after December 31, 2025.

Every dollar you exclude through an FSA reduces the expenses eligible for the credit, dollar for dollar. Since the credit’s cap for two or more children is $6,000 and the new FSA limit is $7,500, maxing out an FSA can wipe out the credit entirely. For most families in the 20% bracket, the FSA’s savings on income and payroll taxes exceed what the credit would have delivered, but run the numbers both ways before your employer’s open enrollment.

Divorced or Separated Parents

Only the custodial parent can claim the Child and Dependent Care Credit, regardless of who claims the child as a dependent. The custodial parent is the one the child lived with for more nights during the year; if nights were equal, the parent with the higher adjusted gross income is treated as custodial.²

This rule works independently of Form 8332, which lets a custodial parent release the dependency exemption to the noncustodial parent. Even when the noncustodial parent claims the child for the Child Tax Credit, the care credit stays with the custodial parent.

Extra Steps if You Employ a Nanny at Home

Paying someone to care for your child in your home can make you a household employer. If you pay a household employee $3,000 or more in cash wages during 2026, you owe Social Security and Medicare taxes on those wages, split between you and the employee, and you may also owe federal unemployment tax.⁷

You report those taxes on Schedule H, attached to your Form 1040 by April 15, and issue the employee a W-2 by January 31.⁷ Skipping this can jeopardize the credit itself, since Form 2441 depends on reported wages and a valid taxpayer ID for the provider.

What Records to Keep

Keep daycare receipts, canceled checks, provider contracts, and your completed Form 2441 for at least three years from the date you file, which is the standard IRS assessment window.⁸ If income is underreported by more than 25%, that window stretches to six years, so keeping records for six is the safer default.

1
Internal Revenue Service. Topic No. 602, Child and Dependent Care Credit
2
Internal Revenue Service. Publication 503, Child and Dependent Care Expenses
3
Internal Revenue Service. Child and Dependent Care Credit Information
4
Internal Revenue Service. Form 2441, Child and Dependent Care Expenses
5
Internal Revenue Service. Instructions for Form 2441, Child and Dependent Care Expenses
6
Office of the Law Revision Counsel. 26 USC 129 – Dependent Care Assistance Programs
7
Internal Revenue Service. Publication 926, Household Employer’s Tax Guide
8
Internal Revenue Service. Topic No. 305, Recordkeeping