You can get up to $16,000 back in tax credit for child-care expenses. Here's what you need to know
For your 2021 tax return, the cap on the expenses eligible for the credit is $8,000 for one child or $16,000 for two or more. Additionally, you may be able to write off up to 50% of those expenses, depending on your income . This means you potentially could get a maximum credit of $4,000 for one child and $8,000 for two or more .
Be aware that if you have a dependent care flexible spending account, the child-care expenses you cover through that FSA cannot count toward the tax credit. The money in that account is made pre-tax — meaning you already get a tax benefit. However, there are instances when you may be able to take advantage of both an FSA and the tax credit, Alison said. Generally, for 2021, if your qualified expenses exceeded your FSA reimbursements, the difference could qualify if the total doesn't exceed $8,000 or $16,000 .
Meanwhile, the 50% share of expenses for 2021 is for taxpayers with income of $125,000 or lower. So in the above example, you'd get 50% of $3,000, or $1,500, as a credit.
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What If Congress Made The Child Tax Credit Taxable?I am author of the book 'Caring for Our Parents' and senior fellow at The Urban Institute, where I am affiliated with the Tax Policy Center and the Program on Retirement Policy. I also write a tax and budget policy blog, TaxVox, which you may read at Forbes.com or at http://taxvox.taxpolicycenter.org/ Before joining Urban, I was a senior correspondent in the Washington bureau of Business Week.
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