Child & Dependent Care Credit

§ 21. Expenses for household and dependent care services necessary for gainful employment(a) Allowance of credit(1) In generalIn the case of an individual for which there are 1 or more qualifying individuals (as defined in subsection (b)(1)) with respect to such individual, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the applicable percentage of the employment-related expenses (as defined in subsection (b)(2)) paid by such individual during the taxable year. (2) Applicable percentage definedFor purposes of paragraph (1), the term “applicable percentage” means 50 percent—(A) reduced (but not below 35 percent) by 1 percentage point for each $2,000 or fraction thereof by which the taxpayer’s adjusted gross income for the taxable year exceeds $15,000, and (B) further reduced (but not below 20 percent) by 1 percentage point for each $2,000 ($4,000 in the case of a joint return) or fraction thereof by which the taxpayer’s adjusted gross income for the taxable year exceeds $75,000 ($150,000 in the case of a joint return). (b) Definitions of qualifying individual and employment-related expensesFor purposes of this section—(1) Qualifying individualThe term “qualifying individual” means—(A) a dependent of the taxpayer (as defined in section 152(a)(1)) who has not attained age 13, (B) a dependent of the taxpayer (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B)) who is physically or mentally incapable of caring for himself or herself and who has the same principal place of abode as the taxpayer for more than one-half of such taxable year, or (C) the spouse of the taxpayer, if the spouse is physically or mentally incapable of caring for himself or herself and who has the same principal place of abode as the taxpayer for more than one-half of such taxable year. (2) Employment-related expenses(A) In generalThe term “employment-related expenses” means amounts paid for the following expenses, but only if such expenses are incurred to enable the taxpayer to be gainfully employed for any period for which there are 1 or more qualifying individuals with respect to the taxpayer:(i) expenses for household services, and (ii) expenses for the care of a qualifying individual. Such term shall not include any amount paid for services outside the taxpayer’s household at a camp where the qualifying individual stays overnight. (B) ExceptionEmployment-related expenses described in subparagraph (A) which are incurred for services outside the taxpayer’s household shall be taken into account only if incurred for the care of—(i) a qualifying individual described in paragraph (1)(A), or (ii) a qualifying individual (not described in paragraph (1)(A)) who regularly spends at least 8 hours each day in the taxpayer’s household.