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Child and Dependent Care Expense Credit Calculation

Updated: 3/03/2008
Article ID: 3519

Child and dependent care expenses you paid directly are reported on the Dependent Care Expenses Interview screen.

Child and dependent care expenses paid by your employer are reported in Box 10 of Form W-2. You may be able to exclude some of the employer-paid expenses from your income.

TurboTax automatically calculates your credit based on both amounts. The actual credit amount is based on a percentage determined by your adjusted gross income (the income amount from line 38 of Form 1040). The percentage ranges from 20% to 35% and decreases as your income goes up.

The percentage is then multiplied by the lesser of:

  • your eligible care expenses or
  • your earned income or
  • your spouse's earned income (if you're married)

TurboTax determines the correct percentage for you after you've entered all your income and answered the questions in the child and dependent care section of the Interview. We calculate the credit amount and complete Form 2441: Child and Dependent Care Expenses to include with your tax return. For detailed information, see IRS Publication 503: Child and Dependent Care Expenses.

Notes:

 
  • the credit amount: might be reduced by the dependent care benefits you receive from your employer, as reported on Form W-2
  • the credit amount:cannot be more than the amount of income tax calculated on your return
  • if the amount on Box 10 of your Form W-2 exceeds the actual expenses you paid to the care provider, you might have to pay taxes on the additional amount

 

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