The April 15 deadline for filing your tax return is just a few days away now, but there's still time to consider which tax credits you'll claim. If you're considering the perennially popular child tax credit, there's another important tax incentive you might be eligible for: the dependent care credit.
A major part of raising a child in the modern world is finding and paying for various sorts of childcare services: think stuff like daycare, or any service that allows you to go to work while your kid is supervised and cared for. These are the sorts of costs that the dependent care credit can help you offset, and it isn't just for people with kids.
These sorts of services can be a huge drain on the wallets of everyday Americans. While more recent data is not yet available, in 2022, the yearly cost of all-day daycare ranged from $6,552 to $15,600, according to a Department of Labor post from November, comparable to the $15,216 median yearly price of rent from the same timeframe. And that's just for one kid.
With those kinds of numbers in mind, the dependent care credit is probably starting to sound like a great deal. For all the information about it -- including what other sorts of dependents qualify -- keep reading, and for more, find out if your state offers its own version of the child tax credit.
What is the dependent care tax credit?
To give it its longer official name, the "child and dependent care credit" is a tax credit that you can claim if you paid for certain care services throughout the tax year. This can be care for a number of different sorts of dependents you might have, so while it's most often associated with children, there are other situations it applies to that we'll touch on in a bit.
Since it's a credit we're talking about (and not a deduction), it will function by lowering the amount you may end up owing in taxes, so it's definitely something to pursue if you expect to owe a lot this year. Given its nature, the dependent care credit is very often referred to in the same breath as the better-known child tax credit, though of course not everyone who qualifies for the latter credit will automatically qualify for the former.
What qualifies for the dependent care tax credit?
If we're talking about services like daycare, you can qualify for the dependent care credit if you paid for childcare for a dependent child during the tax year while they were under the age of 13. (Those pesky teenagers and their self-sufficiency!)
The credit can also apply to care bought for any other sort of person you can claim as a dependent, such as a spouse or another relative, so long as they lived in your home for at least half the year and were unable to take care of themselves. This makes the dependent care credit especially powerful for folks taking care of loved ones with certain disabilities.