The Child & Dependent Care Tax Credit, Explained (2026)
By First Cubby Editorial · Updated 2026-07-09
The Child and Dependent Care Tax Credit gives back part of what you pay for care — including preschool and daycare — for a child under 13, so you can work. For 2026 it applies to up to $3,000 of expenses for one child or $6,000 for two or more, at a rate of 50% for the lowest earners, phasing down to 20% as income rises.
How it works
- Who’s eligible: you (and your spouse, if married filing jointly) must have earned income and need the care to work or look for work.
- Qualifying care: preschool, daycare, a nanny, or before/after-care for a child under 13. Care while you work — not private-school tuition for kindergarten and up.
- Eligible expenses: capped at $3,000 (one child) or $6,000 (two or more) per year.
- Your rate: a percentage of those expenses based on income — 50% at the lowest incomes, stepping down to 20% for higher earners (it never disappears).
- It’s a credit, not a deduction: it cuts your tax bill dollar-for-dollar, but it’s generally nonrefundable.
What changed for 2026
A 2025 federal law raised the top credit rate from 35% to 50% starting in 2026 — the first major update to this credit in decades — so lower- and middle-income families get more back on the same expenses. The $3,000/$6,000 expense caps stayed the same. For the official rules and the exact rate schedule, see the IRS’s Topic No. 602, Child and Dependent Care Credit and Publication 503.
The credit vs. a Dependent Care FSA
You can’t use the same dollars for both — money you run through a Dependent Care FSA reduces the expenses you can count toward this credit. Many families use one or the other, or split between them; higher earners often save more with the FSA. Compare the two before you choose.
This is general information, not tax advice, and figures are for the 2026 tax year and can change. Confirm your situation with the IRS or a tax professional.
Frequently asked questions
Does preschool count for the Child and Dependent Care Tax Credit?
Yes. Preschool and daycare for a child under 13 count as long as the care lets you (and a spouse, if married) work or look for work. Kindergarten and later school tuition don’t count, but before- and after-care can.
How much is the childcare tax credit for 2026?
For 2026, the credit applies to up to $3,000 of care expenses for one qualifying child or $6,000 for two or more. The credit is worth 50% of those expenses for the lowest earners, phasing down to 20% for higher earners — an increase from the prior 35% top rate.
What is the income limit for the child care tax credit?
There’s no hard cutoff — the credit never fully phases out. The percentage steps down as income rises and plateaus at 20% for higher earners, so nearly all working families with care costs get at least some credit.
Is the child care tax credit refundable?
The federal credit is generally nonrefundable — it reduces the tax you owe but won’t create a refund beyond that. Some states offer their own (sometimes refundable) version on top.
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