What is the Child and Dependent Care Credit based on?

The Child and Dependent Care Credit is designed to assist taxpayers in offsetting the costs of care for children or other dependents that enable them to work or look for work. It is specifically calculated based on employment-related child and dependent care expenses incurred during the tax year. This means that the credit allows taxpayers to recover a percentage of the qualifying expenses they pay for the care of their dependents, up to a certain limit.

To qualify, the care must be provided so that the taxpayer can work or seek work, and it can cover expenses for children under the age of 13 or dependents who are unable to care for themselves. As such, the focus is on the actual costs incurred for care rather than simply being based on income, the number of children, or total tax liability. This makes it vital for taxpayers to accurately report and keep records of their qualifying expenses to claim the credit effectively.