Definition
The Child and Dependent Care Credit offsets part of the cost of care that lets a taxpayer work.
How It Works
Qualifying expenses for the care of a child under 13 or a disabled dependent generate a credit equal to a percentage of those costs, up to a limit. The percentage declines as income rises.
Example
A working couple paying for daycare claims a credit on a portion of those expenses.
Who It Applies To
Working taxpayers paying for dependent care.
Watch-Outs
The credit percentage and eligible expense caps are modest, and a dependent care FSA may provide a larger benefit for some families.
