Dependent Care Expenses: Definition, Eligibility, and Tax Implications
Dependent care expenses refer to costs paid for the care of a qualifying individual, such as a child or a disabled spouse, incurred to allow the taxpayer (and their spouse, if filing jointly) to work or look for work. These expenses are a key consideration within personal finance and tax planning strategies, particularly for working families. The Internal Revenue Service (IRS) outlines specific criteria for what qualifies as a dependent care expense, primarily related to earning income.46, 47
To be considered a dependent care expense, the care must be for a "qualifying person" who is either a dependent under age 13, or a dependent or spouse of any age who is physically or mentally incapable of self-care and lives with the taxpayer for more than half the year. The expenses must be work-related, meaning they enable the taxpayer to be gainfully employed or actively search for employment.45
History and Origin
The concept of offsetting dependent care costs through the tax code gained traction as more women entered the workforce, highlighting the significant financial burden of childcare. Prior to specific legislation, such expenses were generally not deductible as business expenses, which inadvertently favored single-earner households over dual-income households facing substantial care costs.
In the United States, the Child and Dependent Care Credit (CDCC) was established in 1976, offering a nonrefundable tax credit for employment-related care expenses.42, 43, 44 This credit was designed to alleviate some of the financial disincentives that might otherwise keep parents, particularly mothers, out of the labor force participation.40, 41 Over the years, the credit's provisions have been modified through various legislative acts, though its fundamental purpose remains to support working families with care needs. The Tax Policy Center provides historical data on1, 2345, 67, 8, 910, 111213, 14[15](https://www.ncsl.org/fiscal/child-and-dependent-care-tax-cred[36](https://www.irs.gov/publications/p503), 37, 38it-overview)161718, 19, 20212223, 24, 2526, 272829, 3031, 3233, 34