Childcare tax credits and dependent care FSAs in 2026
For 2026, the federal credit is 20% to 50% of up to $3,000 in child care costs ($6,000 for two or more kids), and a dependent care FSA can cover $7,500.
Published · 7 min read
Quick answer
- For tax year 2026, the federal child and dependent care credit is 20% to 50% of your work-related care costs for a child under 13. It counts up to $3,000 of costs for one child or $6,000 for two or more, so the top credit is $1,500 or $3,000.
- Families with adjusted gross income over $43,000 and up to $75,000 get 35%, or up to $150,000 if married filing jointly. That is $1,050 for one child or $2,100 for two or more.
- A dependent care FSA can cover up to $7,500 of 2026 care costs with pay that isn't taxed. Each FSA dollar reduces the costs you can count toward the credit.
- Ohio adds a nonrefundable credit if your modified adjusted gross income is under $40,000: 25% of your federal credit, or 100% under $20,000.
How much is the federal child care credit worth in 2026?
The credit is a percentage of what you pay for care, and the percentage depends on your adjusted gross income (AGI). A 2025 federal law raised the top rate from 35% to 50% starting with tax year 2026 (IRS).
The costs you can count stay at $3,000 for one qualifying child and $6,000 for two or more.
| Adjusted gross income | Credit rate | Top credit, 1 child | Top credit, 2 or more |
|---|---|---|---|
| $15,000 or less | 50% | $1,500 | $3,000 |
| $15,001–$43,000 | 49% down to 36% | $1,470 down to $1,080 | $2,940 down to $2,160 |
| $43,001–$75,000 ($43,001–$150,000 joint) | 35% | $1,050 | $2,100 |
| $75,001–$103,000 ($150,001–$206,000 joint) | 34% down to 21% | $1,020 down to $630 | $2,040 down to $1,260 |
| Over $103,000 (over $206,000 joint) | 20% | $600 | $1,200 |
The rate drops 1 point for each $2,000, or part of $2,000, of AGI over $15,000 until it reaches 35%. A second step-down starts above $75,000, or $150,000 on a joint return. It drops 1 point for each $2,000 ($4,000 joint), or part of that amount, until the rate reaches 20% (26 U.S.C. 21).
The credit is nonrefundable: it can lower your federal income tax to zero, but any amount above your tax isn't paid to you (IRS Publication 503).
Who qualifies, and which costs count?
You can claim care for a child who is your dependent and was under 13 when the care was provided. The care has to let you, and your spouse if you're married, work or look for work (IRS Publication 503).
Both spouses need earned income, unless one was a full-time student or unable to care for themselves. Married couples generally must file a joint return to claim the credit.
These costs generally count:
- Daycare, preschool and nursery school
- Before- and after-school care for children in kindergarten and up
- Day camp, even one that focuses on a single activity
- Application fees, agency fees and deposits you must pay to get care
These don't:
- Kindergarten or school tuition
- Overnight camp
- Transportation that isn't provided by the care provider
- Payments to your own child under 19 or to anyone you claim as a dependent
- The part of the bill paid by PFCC, a Child Care Choice Voucher or another agency, since only what you pay yourself counts
You'll list each provider's name, address and taxpayer identification number on Form 2441. IRS Form W-10 is one way to ask your provider for it.
How does a dependent care FSA work with the credit?
A dependent care FSA lets you pay for care with money set aside from your pay before tax. The tax code calls it a dependent care assistance program. For 2026, you can exclude up to $7,500 a year, or $3,750 if married filing separately, up from $5,000 (IRS Publication 15-B).
The money also isn't treated as wages for Social Security and Medicare tax (26 U.S.C. 3121). That saves the 7.65% employee payroll tax as well as income tax (IRS Topic 751).
The amount can't exceed your earned income or your spouse's, whichever is lower (26 U.S.C. 129). Employers don't have to raise their plans to the new $7,500 limit, so check your plan's maximum (Hill Ward Henderson).
You can't count the same dollar twice. Every dollar you run through an FSA comes off the $3,000 or $6,000 limit for the credit (IRS Publication 503).
With one child, an FSA of $3,000 or more leaves no costs for the credit. With two or more, a $5,000 FSA leaves $1,000 for the credit, worth $350 at the 35% rate.
Childcare tax calculator, tax year 2026
How Much Can the Childcare Tax Credit and an FSA Save You?
Estimate the federal child and dependent care credit, Ohio's credit and a dependent care FSA for your family, and see which saves more.
Up to $7,500 for 2026, if your employer offers one.
The credit can't be more than this. It's on last year's return if your income is similar.
An estimate, not tax advice. The credits are nonrefundable, so they only lower tax you owe: without your federal tax figure the federal credit shown is the most it could be, and Ohio's credit is capped at an estimate of Ohio tax (2.75% of income above $26,050). The FSA estimate assumes your pay is under the Social Security wage limit. The rules behind it are in our guide to childcare tax credits and FSAs.
Does Ohio have its own child care credit?
Ohio has a child care and dependent care credit for families with modified adjusted gross income (MAGI) under $40,000. It equals 25% of your federal credit, or 100% of the federal credit if MAGI is under $20,000.
Ohio MAGI is your Ohio adjusted gross income plus any business income deduction. You must claim the federal credit on Form 2441 to qualify, and the Ohio credit is nonrefundable (2025 Ohio IT 1040 instructions).
Ohio's tax law follows the federal tax code as it stood on March 5, 2026, which includes the new federal credit rates (Ohio Revised Code 5701.11).
There is a catch at the lowest incomes. For 2026, Ohio taxes no income up to $26,050 (Ohio Revised Code 5747.02). A family with less than $20,000 in wages usually owes no Ohio tax, so the credit has nothing to reduce.
What does this look like for a Northeast Ohio family?
These two examples use 2026 tax rules and 2024 median center prices for Cuyahoga, Summit and Geauga counties from Ohio's market rate survey. They assume the standard deduction and leave out other credits.
Two working parents, one baby, an FSA at work
A married couple in Summit County files jointly with $110,000 in AGI. They pay $16,900 a year for full-time infant care ($325 a week × 52), and their credit rate is 35%.
Their taxable income is $77,800 ($110,000 minus the $32,200 standard deduction). That is in the 12% bracket, which runs to $100,800 for joint filers in 2026 (IRS).
- Credit only: 35% × $3,000 = $1,050.
- A $7,500 FSA: it uses up the $3,000 limit, so the credit is $0. The $7,500 skips 12% federal income tax ($900), 7.65% payroll tax ($573.75) and Ohio's 2.75% rate ($206.25), for $1,680 in all.
For them, the FSA saves about $630 more, before any city income tax. With two children, though, the credit alone would be $2,100, more than the FSA's $1,680, so run both numbers for your family.
A single parent with a preschooler
A single parent in Cuyahoga County files as head of household with $38,000 in AGI, all from wages. She pays at least $3,000 a year for preschool.
- Federal credit: her rate is 38%, which is 50% minus 12 points for the $23,000 over $15,000. The credit is up to $1,140 (38% × $3,000) if she owes at least that much federal income tax.
- Ohio credit: her MAGI is under $40,000, so Ohio adds 25% of $1,140, or $285. It can lower her Ohio tax but not below zero.
At this income, a parent with one child may also qualify for the Child Care Choice Voucher. Its limit for a family of two is $3,607 a month (DCY Procedure Letter 45). Only her own share would then count, and her credit stays the same if that share is still $3,000 or more for the year.
Common questions
Do registration fees count toward the credit?
Fees you must pay to get care can count. IRS Publication 503 counts application fees, agency fees, deposits and similar indirect costs when you have to pay them to get care. A deposit you forfeit without receiving care doesn't count.
Can I count what I pay a grandparent to watch my child?
Payments to relatives can count, as long as the relative isn't your dependent and isn't your own child under 19. You'll need their name, address and Social Security number for Form 2441 (IRS Publication 503).
Does summer camp count?
Day camp can count, even one built around a sport or another single activity. The cost of overnight camp isn't a work-related expense under IRS rules, so it doesn't count (IRS Publication 503).
What records should I keep?
Keep a completed Form W-10 or other record of each provider's name, address and taxpayer identification number. If the provider details on your return are wrong or incomplete, the IRS can deny the credit. Showing that you made a real effort to get them, such as with a completed W-10, can help (IRS Publication 503).
Sources
- 26 U.S.C. 21: Expenses for household and dependent care services necessary for gainful employment, Legal Information Institute, Cornell Law School. Checked November 3, 2026.
- 26 U.S.C. 129: Dependent care assistance programs, Legal Information Institute, Cornell Law School. Checked November 3, 2026.
- 26 U.S.C. 3121: Definitions (wages for Social Security and Medicare tax), Legal Information Institute, Cornell Law School. Checked November 3, 2026.
- Working Families Tax Cuts, Internal Revenue Service. Checked November 3, 2026.
- Publication 503 (2025), Child and Dependent Care Expenses, Internal Revenue Service. Checked November 3, 2026.
- Publication 15-B (2026), Employer's Tax Guide to Fringe Benefits, Internal Revenue Service. Checked November 3, 2026.
- IR-2025-103: IRS releases tax inflation adjustments for tax year 2026, Internal Revenue Service. Checked November 3, 2026.
- Topic no. 751, Social Security and Medicare withholding rates, Internal Revenue Service. Checked November 3, 2026.
- Section 5747.054, Tax credit based on federal dependent care credit, Ohio Revised Code. Checked November 3, 2026.
- Section 5701.11, Effect of changes to the Internal Revenue Code, Ohio Revised Code. Checked November 3, 2026.
- Section 5747.02, Tax rates, Ohio Revised Code. Checked November 3, 2026.
- 2025 Ohio IT 1040 and SD 100 instructions, Ohio Department of Taxation. Checked November 3, 2026.
- Dependent Care FSA Limit Increased to $7,500 for 2026, Hill Ward Henderson. Checked November 3, 2026.
- 2024 Ohio Early Care and Education Market Rate Survey Analysis: Final Report, Strategic Research Group for the Ohio Department of Children and Youth. Checked November 3, 2026.
- Procedure Letter 45: Update to 2026 Early Care and Education Income Eligibility Standards, Ohio Department of Children and Youth. Checked November 3, 2026.
- Child Care Financial Assistance Options, Childcare.gov, U.S. Department of Health and Human Services. Checked November 3, 2026.