Lesson 15

Credits Part 3

Dependent Care

Section G

VITA/TCE

TRAINING 101

• What is the Dependent Care Credit
• Requirements for the credit
• What expenses qualify
• How to enter in Taxslayer
• How credit flows to 1040

In this presentation we will cover:

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Dependent Care Credit

• A Non-refundable Credit (can only pay income tax liability)
• Credit ranges from 20% to 50% of the taxpayer’s expenses. (automatically calculated by software) ☺
• Allows taxpayers to reduce their tax by a portion of their child and dependent care expenses.
• The credit may be claimed by taxpayers who, in order to work or look for work, pay someone to take care of their qualifying person.

• Qualifying child under age 13

• Or Spouse or Dependent who is physically or mentally not able to care for oneself:

• Persons who can't dress, clean, or feed themselves because of physical or mental disabilities are considered not able to care for themselves.
• Also, persons who must have constant attention to prevent them from injuring themselves or others are considered not able to care for themselves.

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A Qualifying Person

The meaning of “incapable of self-care” is not the same as “permanently and totally disabled.”

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Dependent Turns 13 During the Tax Year?

• If the child turns 13 during the tax year, only expenses paid before the child’s 13th birthday are eligible.

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• If the child is physically or mentally incapable of self-care, age does not disqualify them from eligibility.

Requirements

Residency:

• The qualifying person must have lived with the taxpayer for more than half the year.

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Earned Income Requirement:

• The taxpayer (and spouse, if filing jointly) must have earned income during the year.

What Expenses Qualify

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What Expenses Qualify

Expenses paid so you can work or look for work or go to school Full Time:

• Preschool or home day care,
• Before- or after-school care for a child in kindergarten or higher grade
• Summer/Winter Camp
• In-home care – Household services that support a qualifying person's well-being, such as a housekeeper or cook.
• Adult Day Programs

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Cannot claim expenses for schooling or overnight camps

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How Much is the Credit?

In 2025, taxpayers can receive between 20% and 35% of their dependent care expenses as a non-refundable tax credit.

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Starting in 2026, the credit increases! Taxpayers may receive between 35% and 50% of what they paid for dependent care — a much bigger help for working families.

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Paying Relatives for Dependent Care Services

Taxpayers can pay anyone they want,

but that doesn’t mean they can claim all their expense on their taxes.

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They can claim payments made to relatives who provide care for a qualifying dependent.

They CANNOT claim expenses paid to:

• The Taxpayer’s spouse
• Taxpayer’s child under age 19 (even if not a dependent)
• A parent of the child (if the child is under age 13)
• Another dependent they are claiming on their tax return

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Payments must be for actual care services, not gifts or informal support.

The caregiver is required to report the income and needs to provide a Social Security Number or Taxpayer Identification Number to the Taxpayer.

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How to Enter in Taxslayer

How to Enter in Taxslayer

Use Form Finder

Or go to Credits Menu

Enter the providers tax number

No tax number? Select appropriate box

 Must paper file and include a statement demonstrating Taxpayer’s due diligence in trying to get the number.

Tax exempt- no tax number- CAN be e-filed

Taxpayer can get a W-10 and take to Provider to complete (optional)

CAN be e-filed

CANNOT be e-filed

Complete Provider Information

Business or Individual

Complete Provider Information

Select Dependent

and enter amount paid

To claim expense paid for your spouse or other dependent click here

Answer as appropriate

2025 in 2026?

🡨Provider information

🡨Dependent Care Expenses

New Look for Form 2441

How the Non-Refundable Credit flows to the 1040 Tax Return

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Dependent Care Exclusion

(Not common for our sites)

A tax benefit offered through an employer to help pay for child or dependent care expenses.

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Contributions can come from:

• Employee pre-tax payroll deductions
• Employer contributions
• Or a combination of both

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The money is excluded from taxable income, meaning federal income tax is not paid on the excluded amount. ☺ Sweet!

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Qualified expenses must be for care that allows the taxpayer (and spouse, if married) to work or look for work.

Quick Comparison – Exclusion vs. Credit (2026)

Can qualify for both BUT!!! No Double Dipping; can not use the same money from exclusion for Credit.

WOO-HOO!!!

You Did it!

Next Up: Practice