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Child And Dependent Care Tax Credit For 2021 – Temporary Enhancements

The American Rescue Plan brings good news for parents with young children, as the Child and Dependent Care Tax Credit is getting some major upgrades for 2021. The credit is calculated by multiplying a taxpayer’s eligible expenses by their “Applicable Percentage,” and both the expense amount and percentage factor will be increased for 2021.

As a result, many taxpayers will receive dramatically larger Child and Dependent Care Tax Credits this year. Plus, those potentially much larger credit amounts will be fully refundable!

The changes made by the American Rescue Plan aren’t good news for all taxpayers, though. In fact, certain high-earning clients will find where once they received a relatively small Child and Dependent Care Tax Credit, none will be available for 2021.