"can we still claim upto $2500 for the credit"
The way it works is this:
The amount in box 10 on your W-2 is removed from Wages, assuming that you otherwise qualify and assuming you used this money to pay for child care.
The maximum amount of child and dependent care expenses you can factor into the calculation is $3,000 if you have one child and $6,000 is you have two or more.
From this $3,000 or $6,000, the $2,500 must be subtracted. This leaves ether $500 or $3,500. The credit percentage is then applied to this amount, from 20% to 35%. Multiplying the maximum percentage against the higher number gives you $1,225 ( .35 * $3,500).as the largest possible credit.
The credit you will actually get depends on a number of factors such as your Adjusted Gross Income (AGI), how much you spent on child and dependent care over and above the box 10 amount, and the number of children.
Please do not confuse "credit" with "deduction" - they have two different meanings. You don't get a "credit" for that second $2,500, if it used to calculate the credit. The $2,500 in box 10 is the deduction.
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