Mother in law helped (and lived) with us for 4 months during the pandemic to care for newborn twins and wife who was not able to care for herself due to complications. Hospital would have provided a nurse through insurance but was complicated with COVID. Can I claim Child and/or dependent care for MIL assistance? Housing/time/driving/etc?
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If you PAID your MIL to take care of your children so that you could both work, then you can use the child and dependent care credit. Otherwise, you had a situation in which a family member helped you ---that is not deductible. You cannot deduct anything for driving your MIL around or for having her stay with you to help with her grandchildren.
The child and dependent care credit is available if you pay someone to care your children so that you and your wife can work full time. You can also claim the credit if you had to pay for care so that you could work if you wife was temporarily disabled and unable to care for herself or the children. If your wife worked part of the year, it will be easier to claim the credit mathematically. If she did not work at all during the year, the ability to claim the credit will depend on a mathematical formula based on how many months she was disabled.
You must pay for the care. You must provide the name and social security number of the care provider, and the IRS will look to that person's tax return for matching income, and if it isn't there, will audit them. If the care was provided in your home, the care provider will generally be your household employee, and you would be required to pay household employee's tax and give them a W-2 if the amount you paid was more than $2,200.
You can't claim the credit based on any other costs (mother-in-law's travel, or food, or in-kind housing assistance to live with you). Only what you paid her in wages by cash or check.
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