Child and Dependent Care Credit (CDCC) | Tax FAQs
Information for Tax Year 2023
What is the Child and Dependent Care Credit?
The Child and Dependent Care Credit (CDCC) provides a tax break for families by reducing overall tax liability for child and dependent care expenses. If you pay for care for your child under the age of 13, or for your spouse or dependent who is physically or mentally unable to care for themselves, you may be eligible to claim this credit.
How much is the credit?
The credit is a percentage of your work-related expenses and can be between 20% to 35%, depending on your AGI. Those who have an AGI below $15,000 will qualify for the full 35%. The dollar limit you can use to figure your credit is typically $3,000 for one qualifying person or $6,000 for two or more qualifying persons. This is a non-refundable credit, which means if you don't owe any tax, this credit is not available to you.
If you received dependent care assistance from your employer, you must reduce your qualifying expenses by this amount since it already reduces your taxable income.
Who is eligible for claim the CDCC?
To qualify for this credit, you must:
Pay someone to care for your qualifying child or dependent so you can work or look for work;
Have earned income from employment or self-employment. If married, your spouse must have earned income; and
File as single, married filing jointly, head of household, or as a qualifying widow with a dependent.
There are some exceptions for legally separated or divorced individuals, those who go to school full-time, and those who are disabled.
Who is considered a qualifying child or dependent?
A qualifying person is someone who has lived with you for more than half the year and is:
Your child was under age 13 when the care was provided.
Your spouse who isn't mentally or physically able to care for themselves.
Your dependent who isn't mentally or physically able to care for themselves.
Someone who isn't mentally or physically able to care for themselves who would have been your dependent but (1) they receive more than a certain gross income amount, (2) they file a joint return, or (3) you can be claimed as a dependent on someone else's return.
The IRS defines someone who is "physically or mentally not able to care for themselves" as one who can't dress, clean, or feed themselves due to physical or mental limitations. This also includes those who need constant attention to prevent them from injuring themselves or others.
What are the qualifications for a child or dependent care provider?
Your child or dependent care provider cannot be:
Someone you claim as a dependent;
The parent of your qualifying person;
Your spouse; or
Your child is under the age of 19.
How do I claim the credit?
To claim the credit, you must file a Form 1040, 1040-SR, or 1040-NR. For each qualifying person, you will need to provide their name, social security number, and the qualifying expenses you incurred and paid for child or dependent care. You will also need the name, address, taxpayer identification number of your child or dependent care provider, and the amount you paid them.
It's important that you keep detailed records of your child or dependent care expenses so you can file an accurate tax return.
Need help filing?
Keeping up with all the latest credits and deductions can be a lot. Luckily, our tax preparers are well trained and are always up to date on the newest changes. Filing with a knowledgeable and experienced tax preparer can help you save money or get a bigger refund by finding all the credits and deductions you qualify for. If you want to work with one of our preparers here at Northside Tax Service, give us a call at (360) 922-0235!
Disclaimer: This material is prepared for informational purposes only, and is not tax advice. Please speak with a tax professional or visit the additional resources below to see how this information may apply to you.
