Does The Credit For Child And Dependent Care Have A Phaseout?

The Child and Dependent Care Tax Credit (CDCTC) is a tax break designed to partially offset child care expenses of working families. It is available to taxpayers with dependent children under the age of 17 and can reduce their tax bill on a dollar-for-dollar basis. The CTC currently provides up to $2,000 per child under 17 under the 2017 Tax Cuts and Jobs Act (TCJA). If the CTC exceeds taxes owed, families may receive up to $15,000 per child under 17.

For 2021, the 50% amount begins to phase out if adjusted gross income is more than $125,000, and completely phases out if adjusted gross income is over $59,210. The credit is limited and phases out, with the phaseout beginning when adjusted gross income exceeds $52,160 in 2019 and fully phased out when income reaches $64,160 for claimants. The maximum credit will be $1,050 (one child/dependent) or $2,100 (two or more children/dependents).

The credit cap phases down as income levels increase, with the beginning of the reduction increasing from $15,000 to $125,000 of adjusted gross income (AGI). The credit is unavailable for those who are paying someone to take care of their children or another member of household while they work. Further information can be found in IRS Publication 503, Child and Dependent Care Expenses, and IRS Tax Tip 2022-33, March 2, 2022.