For 2021 only, the child and dependent care credit increased significantly and is fully refundable even if you have no tax liability, so don’t forget to keep track of your work-related child care expenses. The dollar limit for eligible expenses is $8,000 for one child and $16,000 for two or more qualifying children. If your income is $125,000 or less, you get the maximum 50% credit rate. Otherwise, if your income is more than $125,000, the 50% rate decreases as your income rises. The credit becomes unavailable when your income exceeds $438,000.

In addition, you may be eligible to exclude up to $10,500 ($5,250 if MFS) of employer-provided dependent care benefits from gross income for 2021. However, you cannot use any child care expenses paid with these tax-free benefits for the child and dependent care credit.

This article carries no official authority, and its contents should not be acted upon without professional advice. For more information about this topic, please contact our office.