Is The Child Care Credit Determined By The Prior Year?

The Child and Dependent Care Tax Credit is a tax credit that can be claimed by eligible taxpayers who paid for someone to care for a child, dependent, or spouse last year. The credit is calculated based on income and a percentage of expenses incurred for the care of qualifying persons. It is a tax break for working people with qualifying dependents and can help offset costs.

For tax year 2021, the top credit percentage of qualifying expenses increased from 35 to 50. Some taxpayers may qualify for the credit, which is a refundable credit for taxpayers and their spouses (if married filing jointly), having a principal place. The credit is calculated based on the amount spent for child and dependent care and a percentage of expenses incurred for the care of a qualifying individual while working or looking for work.

The maximum credit covers only about 10 of the average annual cost of care for two children. The credit is calculated based on income and a percentage of the expenses incurred for the care of a qualifying person while working or looking for work. Filers can use their earned income from either the current year or the prior year to meet CTC eligibility requirements.

In order to claim the Child and Dependent Care Tax Credit/Dependent Care Credit, taxpayers must first enter their income earned from working. The credit provides financial relief for families who pay for child or dependent care expenses.