The Child and Dependent Care Tax Credit is the tax break most families employing a nanny will touch. If you pay for care so you (and a spouse) can work, a percentage of those costs comes back as a credit against your tax bill. It's straightforward once you know the three numbers that drive it.

Who qualifies

  • You paid for care for a child under 13 (or a spouse/dependent unable to care for themselves).
  • The care let you — and your spouse, if married — work or look for work.
  • You paid a caregiver who isn't your dependent (a nanny qualifies).
  • You pay on the books and can report the caregiver's name, address, and SSN or EIN.

The expense limits

The credit is based on your qualifying care expenses, up to a cap:

  • $3,000 in expenses for one qualifying child.
  • $6,000 in expenses for two or more qualifying children.
A nanny's wages easily exceed these caps, so most families simply claim the maximum — the credit is a percentage of $3,000 or $6,000, not of everything you paid.

The percentage — and what changed for 2026

The credit is a percentage of those capped expenses, and the percentage scales with income. For years the range was 20% to 35%. Starting in 2026, the top percentage was raised — up to 50% of expenses for the lowest-income families — then it phases down as income rises, landing at 20% for higher earners.

  • Lower incomes: up to 50% of the capped expenses.
  • Middle incomes: somewhere in between as it phases down.
  • Higher incomes: 20% (the floor).
The exact percentage at each income level and the phase-down thresholds are detailed and change — this is a plain-English overview, not tax advice. Check current IRS instructions for Form 2441 or ask a tax pro for your bracket.

How to claim it

You claim the credit on Form 2441, filed with your 1040. You'll list the caregiver's details and the amount paid. That's why on-the-books pay matters — no W-2 and SSN/EIN, no credit.

Using it with a Dependent Care FSA

If you also use a Dependent Care FSA, money run through the FSA reduces the expenses you can count toward this credit — you can't double-dip on the same dollars. Many families with two or more kids do both: max the FSA, then apply leftover expenses (up to the $6,000 cap) to the credit.

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The bottom line

The Child & Dependent Care Credit returns a percentage — up to 50% for 2026's lowest incomes, 20% for higher earners — of up to $3,000 (one child) or $6,000 (two or more) in care costs. Claim it on Form 2441, pay your nanny on the books, and coordinate it with any FSA.