Childcare and Tax Credits

Will there be anything different on childcare tax credits when filing for 2021? And how does having a  Dependent Care Flexible Spending Account affect childcare tax credits when filing? 

RossP88
Expert Alumni

Deductions & credits

Hi! The Dependent Care Expenses Credit has changed quite dramatically since tax year 2020. The potential credit for qualifying expenses is much higher (50% compared to 30% in 2020) and the allowable amount of expenses increased to $8,000 for a single child or $16,000 for multiple. The maximum that an individual or joint filers can use is up to $10,500 from a dependent care FSA which is a substantial increase from last year. Similar to last year you cannot use the dependent care credit for expenses paid with an FSA. For instance If you paid $10,500 in dependent care expenses through an FSA for a single child, you could not claim the child tax credit. You could claim the child tax credit on $5,500 of expenses if you had multiple children and paid $16,000 in total child care expenses with $10,500 coming from an FSA.

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