The American Rescue Plan Act of 2021 made some changes to the Child and Dependent Care Credit. This will mean more credits for many working families.
It increased the cap on eligible dependent care expenses to $8,000 for one qualifying person and $16,000 for two or more qualifying persons. That’s a substantial increase from the old $3,000 and $6,000 caps from past years.
There were increases to the percentage of eligible expenses allowed, and increases to the income range that are now eligible for a higher percentage of the credit than in past years.
However, there is also an income cap. If your adjusted gross income exceeds $438,000, you are not able to claim the credit at all.
Finally, as long as you lived in the United States for greater than half the year, the credit will now be refundable if your credit exceeds your tax.
Be sure to provide your CPA with the name, address, tax identification number and amount you paid each of your care providers in order to claim the credit.
Honorine M. Campisi, CPA