The dollar limit on work-related expenses that can be taken into account in calculating your credit is $3,000 for one qualifying person, or $6,000 or two or more qualifying persons. If you paid work-related expenses for the care of two or more persons, the $6,000 limit does not necessarily have to be divided equally among them.
The dollar limit is a yearly limit, and it remains the same no matter how long you have a qualifying person in your household during the year.
As mentioned above, if you receive dependent care benefits from your employer, the amount of those benefits reduces your dollar limit on work-related expenses eligible for the credit.
Amount of the Credit
The amount of the credit is calculated by taking your work-related child and dependent care expenses (subject to the earned income and dollar limits), and multiplying by a percentage based on your adjusted gross income. There is a table on Form 2441, Child and Dependent Care Expenses, and on Schedule 2 of Form 1040A that shows these percentages. The maximum credit rate is 35%, for adjusted gross income of up to $15,000, and progressively decreases to 20% as adjusted gross income rises to $43,000.
How To Claim the Credit
In order to claim this credit, or to exclude or deduct dependent care benefits, you will need to file Form 2441, Child and Dependent Care Expenses, if you file Form 1040, or Schedule 2 if you file Form 1040A. You cannot file Form 1040EZ.
The credit is limited to the amount of any other taxes you owe, and you cannot get a refund if the child and dependent care credit is more than this amount.