Calculate Your Tax Savings
Child Tax Credit vs Child and Dependent Care Credit
The Child Tax Credit (CTC) is up to $2,000 per qualifying child and is based on your income, not on actual child care expenses. The Child and Dependent Care Credit (Form 2441) is based on a percentage (20-35%) of your actual child care expenses up to $3,000 for one child or $6,000 for two or more. You may qualify for both credits, but the Dependent Care FSA (DCAP) reduces the expenses eligible for the Form 2441 credit.
How Child Care Tax Savings Work
The US tax code offers two main ways to reduce the cost of child care: the Child and Dependent Care Credit (CDCC) and the Dependent Care Flexible Spending Account (DCFSA/DCAP). This calculator helps you estimate your savings from both options and find the optimal combination for your family.
The Child and Dependent Care Credit allows you to claim 20-35% of qualifying child care expenses, up to $3,000 for one child or $6,000 for two or more. Your credit percentage depends on your adjusted gross income (AGI) — families earning $15,000 or less qualify for the full 35%, while those earning over $43,000 receive 20%. The credit is claimed using IRS Form 2441.
A Dependent Care FSA (DCAP) lets you set aside up to $5,000 per year in pre-tax dollars through your employer, saving both income tax and payroll taxes. You can use both the DCAP and the tax credit, but the combined qualifying expenses cannot exceed $3,000 (one child) or $6,000 (multiple children). Use our Nanny Cost Calculator to estimate employer taxes if hiring a nanny.