Tax Optimization
beginner · $0 - $50K
Pay for daycare, preschool, or day camp so you can work?
Starting 2026, get a 20-50% tax credit (up from 20-35% previously) on up to $3,000 in expenses (one child) or $6,000 (two+ children).
Lower income = higher percentage credit.
Enhanced by the OBBBA.
Annual Limit
Credit on $3,000 (one child) / $6,000 (two+ children)
Key takeaways
- Covers 20-50% of work-related care costs for a child under 13 or a disabled dependent, on up to $3,000 (one) or $6,000 (two or more) of expenses.
- The OBBBA raised the top rate from 35% to 50% for lower-income families starting 2026.
- Both spouses generally must have earned income (or one be a student or disabled).
- Day camp qualifies; overnight camp does not.
Requirements
- Care for child under 13 or disabled dependent
- Both parents must work (or one in school)
- Care provider cannot be your dependent or child under 19
How to Implement
- 1Track childcare expenses throughout the year
- 2Get care provider's name, address, tax ID
- 3File Form 2441 with tax return
- 4Claim credit based on income and expenses
The bottom line
This credit offsets a portion of childcare costs that let you work, at a higher rate for lower incomes under the OBBBA. It works alongside, but does not double-count with, a dependent-care FSA.
Frequently Asked Questions
Related tax optimization strategies
Sources
- Internal Revenue Service, Rev. Proc. 2025-32
2026 inflation-adjusted amounts (tax brackets, standard deduction, estate & gift, FSA, credits)
- Internal Revenue Service, Notice 2025-67
2026 retirement plan limits (401(k), IRA, SIMPLE, catch-up)
- Internal Revenue Service, Rev. Proc. 2025-19
2026 HSA and HDHP inflation-adjusted limits
Educational information only. Not financial, tax, or legal advice or a recommendation. Figures are drawn from the primary sources cited above; verify current amounts with the source before acting.