Child Care Tax Breaks 2026 — Credits, FSA, and Deductions

The federal government offers two main tax benefits for child care: the Child and Dependent Care Credit and the Dependent Care FSA. Together, they can save a family $2,000–$6,000 per year — but you can't double-dip on the same dollars. Choosing the right combination matters.

Estimate your total child care costs and savings with the Child Care Cost Calculator.

Child and Dependent Care Credit

This is a non-refundable tax credit based on child care expenses while you (and your spouse, if married) work or look for work.

Feature	2026 Rules
Maximum expenses eligible	$3,000 (1 child) / $6,000 (2+ children)
Credit percentage	20–35% of expenses (based on AGI)
Maximum credit	$1,050 (1 child) / $2,100 (2+ children)
AGI for max 35% rate	Under $15,000
AGI for min 20% rate	Over $43,000
Refundable?	No — reduces tax owed to $0 but no refund
Qualifying expenses	Daycare, nanny, day camp, before/after school
Non-qualifying	Overnight camp, tutoring, food, clothing

For most families earning over $43,000, the credit is 20% of expenses — meaning $600 for one child or $1,200 for two children.

Dependent Care FSA

A Dependent Care FSA lets you set aside pre-tax dollars from your paycheck to pay for child care. The tax savings come from avoiding income tax AND payroll tax on those dollars.

Feature	Details
Maximum contribution	$5,000/year (married filing jointly) or $2,500 (MFS)
Tax savings at 22% bracket	~$1,100 income tax + ~$383 FICA = ~$1,483
Tax savings at 32% bracket	~$1,600 income tax + ~$383 FICA = ~$1,983
Use-it-or-lose-it	Yes — unused funds are forfeited
Available through	Employer benefit plan (not all employers offer it)
Qualifying expenses	Same as dependent care credit

FSA vs Tax Credit — Which Saves More?

Scenario	FSA Savings	Tax Credit	Better Choice
AGI $40,000, 1 child, $8,000 expenses	$1,100	$600	FSA
AGI $60,000, 1 child, $8,000 expenses	$1,483	$600	FSA
AGI $100,000, 2 children, $15,000 expenses	$1,983	$1,200	FSA
AGI $20,000, 1 child, $4,000 expenses	$600	$1,050	Tax Credit

For most families earning over $25,000, the Dependent Care FSA saves more than the tax credit. But you can use both — apply the FSA to the first $5,000 of expenses, then claim the tax credit on the remaining expenses (up to the $3,000/$6,000 cap minus FSA amount).

State Child Care Tax Benefits

Many states offer additional tax credits or deductions for child care:

State	Benefit	Amount
California	State child care credit	50% of federal credit
New York	State child care credit	Up to $1,113 (refundable)
Colorado	State child care credit	50% of federal credit (refundable)
Oregon	Working family credit	Refundable, based on federal EITC
Louisiana	Child care credit	Refundable, up to $210/child
Minnesota	Child care credit	Refundable, up to $1,440

Check your state's tax agency website for current credit amounts and eligibility rules. Refundable state credits are especially valuable for lower-income families.

Employer Child Care Benefits

Beyond the Dependent Care FSA, some employers offer additional child care support:

Benefit	What It Provides
Employer-subsidized on-site daycare	Reduced rates at workplace facility
Child care stipend	Direct monthly payment toward care costs
Backup care programs	Emergency care days (typically 10–20/year)
Enhanced Dependent Care FSA match	Employer contributes to your FSA

Ask HR about available benefits during open enrollment. Many parents don't realize their employer offers child care assistance.

For state-by-state daycare costs, see Child Care Cost by State. For comparing care types, read Child Care Options Compared. And for government assistance, check Child Care Assistance Guide.