Updated October 29, 2026. Quick answer: The child and dependent care credit rate for 2026 can be as high as 50 percent of your work-related care expenses, up from a top of 35 percent. Public Law 119-21 section 70405 rewrote the rate in paragraph (2) of section 21(a) for taxable years beginning after December 31, 2025; the rate falls to 35 percent as income rises over $15,000, then phases down again toward 20 percent above $75,000 ($150,000 joint). The expense limits of $3,000 and $6,000 were not changed by the Act.
For what changed on the 2026 draft of the form, see Form 2441 2026 changes.
More on the 2026 tax figures: the dependent care FSA limit for 2026.
The rate for 2026
| Step | Rule | Floor |
|---|---|---|
| First reduction | Starts at 50 percent; 1 point off for each $2,000 (or fraction) of AGI over $15,000 | Not below 35 percent |
| Second reduction | 1 point off for each $2,000 of AGI over $75,000 ($4,000 over $150,000 on a joint return) | Not below 20 percent |
| Before the Act (2024 edition) | 35 percent, reduced 1 point per $2,000 over $15,000 | Not below 20 percent |
The new definition reads: “the term ’applicable percentage’ means 50 percent” reduced as the table shows. The first step is “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”. The second step is “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 adjusted gross income “exceeds $75,000 ($150,000 in the case of a joint return)”.
Effective date and the old rule
The change applies to years starting in 2026: “The amendment made by this subsection shall apply to taxable years beginning after December 31, 2025.” Before it, the statute said the percentage was “35 percent reduced (but not below 20 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”. The dollar amounts are written in the statute.
The expense limits did not change
The cap on expenses that count is still “$3,000 if there is 1 qualifying individual with respect to the taxpayer for such taxable year, or” “$6,000 if there are 2 or more qualifying individuals with respect to the taxpayer for such taxable year.” The same section reduces that limit by “the aggregate amount excludable from gross income under section 129 for the taxable year”, which is the dependent care FSA covered on the 2027 dependent care FSA limit.
A worked example
Invented amounts: a single filer with $100,000 of adjusted gross income is $25,000 over the $75,000 start (computed). That is twelve full steps of $2,000 plus a fraction, which counts as a thirteenth, so the second reduction is 13 points. The first reduction has already reached its 35 percent floor at that income, and 35 percent less 13 points is 22 percent (computed). On the $3,000 limit for one qualifying individual, the credit is $660 (computed).
Common mistakes
- Expecting a 50 percent credit at any income. The rate falls to 35 percent as adjusted gross income rises over $15,000, and then phases down again above $75,000.
- Raising the expense limit. The Act changed the rate, not the $3,000 and $6,000 limits.
- Forgetting the FSA offset. Money excluded under a dependent care FSA reduces the expense limit.
- Using the pre-2026 rate for 2026. The new rate applies to taxable years beginning after December 31, 2025.
Related: the 2027 child and dependent care credit, Form 2441, Form 2441 lines 7 to 9c decimal amount, the 2027 dependent care FSA limit, Schedule 3 line 2, and the 2026 tax brackets.
Find the right next step for your situation
About how much do you have invested? Pick the range that fits; your next step appears immediately below.
Talk to an advisor about tax planning
For U.S. investors with $250,000 or more in investable assets. WiserAdvisor is an independent service matching you with 2 to 3 vetted advisers. Its form asks for your ZIP code and answers to a few questions; a match is not guaranteed.
Free to request, with no obligation to hire. By submitting, you consent to calls, texts and emails from WiserAdvisor and up to three advisers. Advisers pay for introductions.
Clear Money Guide may earn a referral payment for a qualifying completed form. An introduction is not a Clear Money Guide recommendation.
Opens on WiserAdvisor’s site in a new tab.
Explore advisor help with tax planning
Considering financial advice? Request an adviser introduction with no obligation to hire.
The form is run by Kapitalwise, our advisor-matching partner. Requesting an introduction is free. Submitting the form shares your contact details with advisers, so expect calls and texts. Advisers pay for introductions. Clear Money Guide may earn a referral payment for a qualifying submitted form, whether or not you hire anyone. A match is not guaranteed.
The Kapitalwise form opens here; you stay on this page.
What happens when you press the button
It asks about nine questions: age, investable assets, location; then your name, email and phone number, and verifies the phone by text. Nothing loads and nothing reaches Kapitalwise until you press the button.
Prefer flat-fee or hourly pricing instead? Compare ranges here.
Answer againSources
- Public Law 119-21 (One Big Beautiful Bill Act), July 4, 2025, enacted text (U.S. Government Publishing Office): www.govinfo.gov
- 26 U.S.C. 21, Expenses for household and dependent care services necessary for gainful employment (U.S. Code, 2024 edition, U.S. Government Publishing Office): www.govinfo.gov
Read from the primary documents linked above on October 29, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer or the IRS itself is the right place to confirm anything consequential.