Can I Claim Child Care Expenses in My Taxes?

Use these links to jump to different sections:

• Who Can Receive the Credit?
• The Credit Is for a “Qualifying Person”
• The Parent Must Have Earned Income
• Child Care Costs Must Be Work-Related
• Getting Legal Help

The child and dependent care credit reduces the tax burden for working parents who have work-related childcare expenses and daycare center fees. A parent can receive a credit of between 20 to 35 percent of their work-related childcare payments. The maximum amount of the credit for childcare expenses that can be claimed is capped at $3,000 for one child or $6,000 for two or more, but that allows for a credit total amount as high as $600 to $1,050 for one child and twice that for two.

When parents are unmarried or divorced, these benefits must be split between the parents in some way. Whether or not a court order designates a certain parent to receive the child care credit may be irrelevant because the IRS has its own rules for which taxpayers can claim the benefit.

Who Can Receive the Credit?

The Internal Revenue Service (IRS) sets the requirements a parent must meet before taking the child care credit. One requirement is that only the custodial parent can claim the benefit. Under IRS rules, the custodial parent is the parent with whom the child lived for the greater number of overnights during the year. The other parent is the noncustodial parent.

A child is treated as living with a parent for a night under any of the following situations:

• The child sleeps at that parent’s home
• The child sleeps at that parent’s home and the parent is not present
• The parent and child are together but away from the parent’s home (for example on vacation or overnight camps together)

There is an exception available for a parent who works at night. If the child lived with each parent for an equal number of overnights during the year, the custodial parent is the parent with the higher adjusted gross income.

The Credit Is for a “Qualifying Person”

Childcare expenses can only be claimed for a “qualifying” child. Under IRS rules, a qualifying child is a child that was 12 years of age or younger (with some rare exceptions) when the child received the care. The qualifying child must also be the parent’s dependent—meaning the parent can claim the child as an exemption on their income tax return.

The Parent Must Have Earned Income

Another requirement to claim the child care tax credit is that the claiming parent (and their spouse if filing a joint return) must have earned income during the year.

That means that the parent must have worked for at least a minimal amount of time during the year. Parents should consult IRS publications to determine whether they meet the earned income requirements under the law. Earned income will not include:

• Workers compensation payments
• Pensions or annuity payments
• Social security benefits
• Interest and dividends
• Unemployment compensation
• Scholarships or fellowship grants

Child Care Costs Must Be Work-Related

Child care provider costs, like babysitting for date nights, will not qualify. To qualify, the childcare costs must have been incurred to allow a parent (and their spouse if filing jointly) to work or to find employment. The work can be full or part-time. It can also include self-employment.

Child care costs can be included for periods of time a parent is looking for work—but if the parent doesn’t find a job and earns no income for the tax year, the parent can’t take this credit.

Getting Legal Help

Parents may want to consult with one another to determine who will claim the child care tax credit. If there is a dispute over the credit during tax season, the parents may need to go to court to resolve the dispute.

Parents in this situation should seek out an experienced family law attorney to discuss their options. For more information on this area, see our overviews of family law and tax law.