Where Do Daycare Expenses Go on Your Tax Return?

Daycare expenses go on Form 2441 (Child and Dependent Care Expenses). The credit that form calculates flows to Schedule 3 (Form 1040), Line 2, and from there to Form 1040, Line 20, where it reduces the tax you owe. The form covers up to $3,000 in expenses for one child or $6,000 for two or more, and returns a credit worth between 20% and 50% of those costs depending on your income.¹

The Path From Daycare Receipts to Your 1040

Three documents are involved, in this order:

Form 2441 is where you list your care providers, your qualifying children, and the amounts you paid. It calculates the credit on line 11.²
Schedule 3 (Form 1040) collects nonrefundable credits that don’t appear on the main form. The Form 2441 result lands on Schedule 3, Line 2.³
Form 1040 pulls the total from Schedule 3, Line 8 onto Line 20, reducing your tax.³

Tax software handles the transfers automatically once you enter the provider details and amounts. If you file on paper, attach Form 2441 and Schedule 3 behind your 1040 in the order given in the instructions. Missing either attachment will hold up the credit.

Filling Out Form 2441

The form has three parts. Complete Part I first, then Part III if it applies to you, and Part II last.

Part I: Your Care Providers

List every person or organization you paid for care during the year. For each provider you need the name, address, taxpayer identification number (an EIN for a daycare center or an SSN for an individual caregiver), and the total amount you paid.²

If a provider refuses to give you their SSN or EIN, you can still claim the credit. Write “See Attached Statement” in the identification number column and attach a description of your efforts to obtain the number.⁴ Asking the provider to complete Form W-10 (Dependent Care Provider’s Identification and Certification) counts as due diligence, even if they don’t fill it out.⁵

Part III: Employer-Provided Benefits (Do This Before Part II)

If your employer offers a dependent care flexible spending account (DCFSA), the amount you set aside shows up in Box 10 of your W-2. Part III determines how much of that you can exclude from income.⁶

Here is where the numbers get tricky. Any dependent care benefits you exclude from income reduce the $3,000 or $6,000 expense limit for the credit, dollar for dollar.¹ If you routed $6,000 through a DCFSA and have two qualifying children, your remaining expense pool for the credit is zero. The DCFSA and the credit draw from the same expenses; you can use both, but the same dollar can’t be counted twice.

For 2026, the maximum DCFSA exclusion is $7,500 for joint, single, or head of household filers, and $3,750 for married filing separately.⁷ Because that exceeds the $6,000 credit cap, families who max out a DCFSA typically have no expenses left for the credit itself.

Part II: Qualifying Persons and Expenses

Enter the name and Social Security Number of each qualifying child or dependent, along with the expenses attributable to each. The form applies the expense caps, factors in your earned income, applies the percentage tied to your AGI, and produces the credit on line 11.² Don’t include amounts already handled in Part III.⁸

What the Credit Ends Up Being Worth

Expenses are capped at $3,000 for one child or dependent and $6,000 for two or more.¹ Under changes made by the 2025 reconciliation law, the credit percentage runs from 50% at the lowest incomes down to 20% at higher ones. For married couples filing jointly, the 35% rate applies to AGI between roughly $43,000 and $150,000, and the rate hits its 20% floor once AGI exceeds $206,000.

Some sample outcomes for two children with $6,000 in qualifying expenses:

At the 50% rate: up to $3,000 credit.
At the 35% rate: up to $2,100.
At the 20% floor: $1,200.

For one child with $3,000 in expenses, the maximum ranges from $1,500 down to $600.

The credit is nonrefundable. It cancels tax dollar for dollar, but if the credit exceeds your tax liability, you lose the difference. There is no refund of the unused portion.

Who and What Qualifies

The credit under Internal Revenue Code Section 21 applies when you pay someone to care for a qualifying person so you (or you and your spouse, filing jointly) can work or look for work. A qualifying person is generally your dependent child who was under 13 when the care was provided.¹ It also covers a spouse or other dependent who is physically or mentally unable to care for themselves and lived with you for more than half the year.⁹ Both you and your spouse need earned income during the year. Married couples generally must file jointly.¹⁰

Qualifying expenses include daycare centers, preschool, pre-kindergarten, nursery school, before- and after-school care, nannies, au pairs, and summer day camp. Preschool and pre-K count in full because the IRS treats them as care rather than education.¹¹

What doesn’t qualify: overnight camps, tuition for kindergarten or any higher grade, and food or clothing costs unless they can’t be separated from the care charges.⁹

You can pay a relative and still claim the credit, but not everyone. The IRS disqualifies payments to your spouse, your child under age 19, anyone you claim as a dependent, and the parent of your qualifying child if that child is under 13.¹¹ Paying a grandparent or a sibling who is 19 or older and not your dependent is fine.

If You Hire a Nanny or In-Home Caregiver

Paying a nanny, babysitter, or au pair who works in your home can qualify for the credit, but it may also make you a household employer. If you control what the caregiver does and how they do it, the IRS considers them your employee. Workers supplied by an agency that controls how the work is done are usually the agency’s employees, not yours.¹²

For 2026, you must withhold and pay Social Security and Medicare taxes if you pay a household employee $3,000 or more in cash wages during the year.¹³ Those taxes are reported on Schedule H, filed with your Form 1040. The credit typically saves a few hundred to a couple thousand dollars; penalties for misclassifying an employee or ignoring household payroll taxes can run well beyond that.

Records to Keep

Save receipts from each provider, bank statements or cancelled checks showing payment, and any Form W-10 you collected.⁵ If the IRS questions the credit, those records are what backs up what you claimed. Keep them for at least three years from your filing date, which is the standard audit window.¹⁴ Digital copies are acceptable.

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. Form 2441 – Child and Dependent Care Expenses
3
Internal Revenue Service. Schedule 3 Form 1040 Additional Credits and Payments
4
Internal Revenue Service. Child and Dependent Care Credit and Flexible Benefit Plans 3
5
Internal Revenue Service. Form W-10 – Dependent Care Provider’s Identification and Certification
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Internal Revenue Service. Instructions for Form 2441 Child and Dependent Care Expenses
7
Office of the Law Revision Counsel. 26 USC 129 – Dependent Care Assistance Programs
8
Internal Revenue Service. Instructions for Form 2441 (2025)
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Office of the Law Revision Counsel. 26 U.S. Code 21 – Expenses for Household and Dependent Care Services Necessary for Gainful Employment
10
Internal Revenue Service. Publication 503, Child and Dependent Care Expenses
11
Internal Revenue Service. Child and Dependent Care Credit FAQs
12
Internal Revenue Service. Publication 926, Household Employer’s Tax Guide
13
Internal Revenue Service. Household Employer’s Tax Guide
14
Internal Revenue Service. Topic No. 305, Recordkeeping