A Credit That Scales with Your Expenses — and Your Income

The child and dependent care credit offsets a percentage of what you pay for care that lets you work or look for work. Two limits shape the number: an expense cap of $3,000 for one qualifying child or $6,000 for two or more, and an income-based rate that starts at 35% and drops one percentage point for every $2,000 (or part of $2,000) of adjusted gross income above $15,000, bottoming out at 20%. Expenses reimbursed through a dependent care FSA reduce the amount that qualifies dollar for dollar — you cannot claim the same dollar through both. Because the credit is nonrefundable, it can only reduce tax you owe; families with little or no tax liability may not be able to use the full amount.