Dependent care tax benefits are specifically related to the costs of caring for a person who qualifies as your dependent so you can go to work. Your dependent may or may not be your child.
Note that the child and dependent care credit is completely separate from the Child Tax Credit. The child tax credit is available to parents/guardians of minor children, whereas the child and dependent care credit specifically relates to care expenses so a person can work.
The child and dependent care credit is a personal tax credit. This credit is for expenses paid for care of a qualifying person to enable a taxpayer or taxpayers spouse to work. This tax credit has many rules and caveats. This blog is an overview and the credit is further explained in IRS Topic 602: Child and Dependent Care Credit and other IRS links provided below. Discuss with your tax professional to see if you qualify for this credit.
Amount of the credit
The maximum expenses you can use for this deduction in 2022 are $3,000 for one qualifying person or $6,000 for two qualifying people. The credit is only a portion of the expense. The maximum credit for one child/dependent is $1,050 and for two children/dependents is $2,100.
If you get a dependent care benefit from your employer, you have to deduct those amounts from the qualifying expenses before figuring your personal tax credit.
Higher income earners receive a reduced credit or may not be eligible for a credit. For 2022, the amount of the credit begins to be reduced when adjusted gross income exceeds $15,000 and when adjusted gross income reaches $438,000, the credit is zero.
Qualifying person
You may deduct expenses for a qualifying person defined as:
- Your child under age 13 at the time care was provided
- Your spouse or dependent person who was unable to care for themselves who lived with you more than half the year
