For 2021, the American Rescue Plan Act has made changes to the credit for child and dependent care expenses reported on Form 2441.

• The credit is fully refundable for taxpayers meeting residency requirements*
• The amount of qualifying expenses has been increased to:
  • $8,000 (previously $3,000) for one qualifying child or up to
  • $16,000 (previously $6,000) for two or more qualifying children
• The maximum credit has increased to 50% of the taxpayer's employment-related expenses:
  • $4,000 maximum credit for taxpayers with one qualifying child
  • $8,000 maximum credit for taxpayers with two or more qualifying children
• The income phaseout amounts and credit  have been increased to the following:
  • 50% of expenses - Begins to phase out when the taxpayer's income exceeds $125,000
    • The credit percentage is reduced by 1% for each $2,000 the taxpayer's AGI exceeds $125,000, The credit is reduced to 20% of expenses when the taxpayer's AGI reaches $183,000
  • 20% of expenses - For taxpayers with AGI between $183,001 and $438,000

*The credit remains non-refundable for taxpayers whose place of abode was not in the United States for more than half the year.

U.S. military personnel who are stationed outside the United States on extended active duty are considered to have their main home in one of the 50 states or the District of Columbia for purposes of qualifying for the refundable portion of the credit.