Child and dependent care credit for 2026: up to 50%

What changed for 2026

A higher rate, and a slower phase-down.

Section 70405 of Public Law 119-21, the 2025 tax law, rewrote the credit’s percentage for tax years beginning after December 31, 2025. Until 2025 the rate started at 35% and fell to 20% once adjusted gross income (AGI) passed $43,000, so every household above that income got 20%. From 2026:

• The rate starts at 50% and falls one point for each $2,000, or part of $2,000, of AGI over $15,000, but not below 35%.
• It stays at 35% until AGI passes $75,000, or $150,000 on a joint return.
• Above that it falls one more point for each $2,000 ($4,000 joint) or part of it, to a floor of 20%.

The expense limits are unchanged at $3,000 for one qualifying person and $6,000 for two or more. The credit remains nonrefundable: IRS Publication 503 says the amount you can claim is limited to your tax.

Your rate by income

Selected AGI levels, 2026 against 2025.

The single column reaches 20% above $103,000; the joint column, above $206,000.

Who and what qualifies

A qualifying person, work-related care, and a named provider.

Publication 503 sets the tests. The care must be for a qualifying person: your dependent child under 13 when the care was provided, or a spouse or other dependent who was not physically or mentally able to care for themselves and lived with you for more than half the year. You must pay the care so that you, and your spouse if filing jointly, can work or look for work. Married couples generally must file jointly.

Nursery school and preschool count as care; kindergarten and higher grades do not, though before- and after-school care can. Day camps can count; overnight camps, summer school, and tutoring do not. You cannot count payments to your spouse, to a parent of the child in care, to anyone you can claim as a dependent, or to your own child under 19. On Form 2441 you list each care provider’s name, address, and taxpayer identification number, and each qualifying person’s taxpayer identification number, generally a Social Security number. If you pay someone to care for a child in your home, you may be a household employer with employment taxes of your own.

The earned income limit

Counted expenses cannot exceed the lower earner’s pay.

The expenses you count cannot be more than your earned income, or, if you are married, the smaller of your earned income and your spouse’s. A couple where one spouse earns $40,000 and the other $50,000, paying $8,000 of daycare for two children, counts $6,000: the dollar limit binds before the earnings limit does. If the lower earner had earned only $4,000, the couple would count $4,000. A spouse who was a full-time student or unable to care for themselves is treated as having some earned income for those months; Publication 503 gives the monthly amounts.

Dependent care benefits come off the top

An FSA and the credit share one limit.

Dependent care benefits that your employer provides tax-free — usually through a dependent care flexible spending account — reduce the $3,000 or $6,000 limit, and the expenses those benefits paid cannot be counted again. Publication 503 has you complete Part III of Form 2441 before figuring the credit. From 2026, Section 70404 of the same law raises the tax-free limit for those benefits to $7,500, which is more than the $6,000 credit limit for two or more children. Enter any excluded benefits in the calculator above to see what is left for the credit.

Two worked examples

What the new rate is worth.

A married couple with $90,000 of AGI, two children in daycare costing $8,000, and a lower earner who made $40,000 counts $6,000 at 35%: a $2,100 credit. At the 2025 rate of 20% it would have been $1,200.

A single parent with $40,000 of AGI and $3,000 of after-school care for one child gets 37% of $3,000: $1,110, against $660 at the 2025 rate of 22%.

Both figures assume enough income tax for the credit to offset, since it cannot create a refund. For how the brackets produce that tax, see the 2026 tax brackets.