The formulas
- Percentage = 50%, reduced 1 point per $2,000 (or fraction) of AGI over $15,000, not below 35%
- Then reduced 1 point per $2,000 ($4,000 joint) of AGI over $75,000 ($150,000 joint), not below 20%
- Expense limit = $3,000 (one individual) or $6,000 (two or more) less section 129 benefits
- Credit = percentage x lesser of expenses, limit, and earned income (lesser spouse if joint)
How it works
For taxable years beginning after 2025, section 21 starts the credit at 50 percent of work-related care expenses, steps it down to 35 percent as AGI rises past $15,000, and then to a floor of 20 percent above $75,000 ($150,000 on a joint return). Expenses are capped at $3,000 for one qualifying individual and $6,000 for two or more, reduced by any dependent care benefits you excluded under section 129.
Expenses also cannot exceed your earned income, or the lesser earned income of the two spouses on a joint return.
Illustrative figures only. Check the result against your firm's methodology before relying on it.
Common questions
Where does the 50 percent start come from?
Section 21(a)(2) as it reads for taxable years beginning after December 31, 2025 starts at 50 percent and steps down to 35 percent, then to 20 percent.
Is the credit refundable?
This tool computes the credit amount only and does not test it against your tax liability.
What if my spouse is a full-time student?
Section 21(d)(2) treats that spouse as earning at least $250 a month ($500 for two or more individuals). Enter that deemed amount as spouse earned income.
Sources
Runs in your browser. The figures you type are not sent to CORAA or stored. Check the result against your firm's methodology before relying on it.