Expanded Child and Dependent Care Credit Amount: Breakdown and Insights
Expanded Child and Dependent Care Tax Credit to Benefit Families Starting in 2026
The Trump administration's 2025 tax cuts and spending legislation, specifically the One Big Beautiful Bill Act (OBBBA), introduces permanent enhancements to the Child and Dependent Care Tax Credit (CDCTC) starting in tax year 2026.
The CDCTC is a non-refundable tax break designed to help parents or caregivers reclaim some of the expenses related to caring for a child under age 13 or a dependent with disabilities. For tax year 2025, working households can claim a portion of child care expenses up to $3,000 for one child or qualifying dependent and up to $6,000 for two or more children.
From 2026 onward, taxpayers will see a higher percentage credit on the same maximum expenses, phased by income. The maximum applicable percentage of eligible dependent care expenses increases from 35% to 50%, providing greater tax savings for qualifying taxpayers. The credit phases down gradually based on Adjusted Gross Income (AGI): from 50% at AGI above $15,000 down to 35% at $43,001-$75,000, and further down to 20% for those with AGI above $75,000 ($150,000 for joint filers). For AGI above $103,000 ($206,000 joint), the rate plateaus at 20%.
The maximum eligible expenses remain unchanged at $3,000 for one qualifying individual and $6,000 for two or more. The credit is non-refundable but permanently expanded, making it more beneficial, especially for low-to-moderate income families.
In addition, the legislation raises the annual income exclusion for employer-provided dependent care assistance programs (dependent care FSAs) from $5,000 to $7,500 starting in 2026 ($3,750 for married filing separately), which is also permanently indexed for inflation going forward.
To qualify for the CDCTC, the child or dependent must live with the taxpayer for more than half of the year and either be a child under the age of 13 or a spouse or dependent of any age who is physically or mentally incapable of self-care. You can claim the CDCTC by filing an IRS Form 1040, 1040-SR, or 1040-NR, and attaching a Form 2441 on your tax return.
If you have a household employee, you may need to file a Schedule H (Form 1040) with your tax return and pay household employment taxes. To check if you are eligible for the CDCTC, use the IRS tool on IRS.gov.
These changes represent a lasting increase in support for families with child and dependent care expenses, aligning benefits more closely with current childcare costs and income levels. However, it's important to note that no indication was found of changes to the credit related to work-eligible SSN requirements under this legislation related to the CDCTC itself, though such rules affect the Child Tax Credit broadly.
[1] IRS.gov - Child and Dependent Care Credit [2] IRS.gov - Work-Related Expenses [3] Congress.gov - One Big Beautiful Bill Act [5] IRS.gov - Dependent Care Assistance Programs
Personal-finance decisions for families will see a significant improvement starting in 2026 with the expanded Child and Dependent Care Tax Credit (CDCTC). The permanent enhancement of the CDCTC provides greater tax savings, with a maximum applicable percentage of eligible dependent care expenses increasing from 35% to 50%. This increased credit benefits families, particularly low-to-moderate income households, as the credit is non-refundable but permanently expanded.
