@turbfiler123
The child tax credit and the child and dependent care credit are two separate things.
The child tax credit is $3000 for 2021, or $3600 if the child is under age 6. If you receive advance payments, they will count against the $3000 or $3600 when you file your tax return. The advance payments don’t change the amount of the child tax credit, only when you receive it. For 2022, the child tax credit reverts back to $2000, unless Congress manages to pass an extension.
The child and dependent care credit is a separate item. For 2021 only, this will provide a tax credit or tax rebate of 50% of care costs for lower income taxpayers. The credit goes back to the old rules on January 1, 2022, unless Congress passes an extension. Under the old rules, the credit was between 20% and 35% of $3000 of eligible expenses.
That makes figuring out your situation complicated, partly because you don’t mention when you would be starting your employment.
For 2021, you would receive a larger credit by taking the higher salary and paying the tuition. Roughly speaking, we are talking about $3000 per month of gross salary and $900 per month of expenses. If your employment and child care both start August 1, you would receive $15,000 of salary and pay $4500 of care expenses by the end of the year. The credit on the care expense would be $2250, while the combined income tax, Social Security, and Medicare tax on the extra $900 per month of income would be about $1125. To say it another way, if you took the salary reduction and free tuition, you would save $1125 in taxes and you could not claim any amount of credit.
If Congress does not extend the enhanced dependent care credit, then you would be better off switching to the lower salary with free childcare starting January 1, 2022. The lower salary would save you about $2500 in income tax over the course of the year, but taking the higher salary and claiming the credit for paying out of pocket (after taxes) would only result in a $900 credit.
Please take note, this is my best estimate based on current facts, but I do not have a complete understanding of your income and tax situation, and I do not know whether the laws will be changed again. Please have your situation reviewed by a professional advisor who knows all your full details.
