It is summer camp season, and here is a fact many parents writing those checks do not know: day camp costs can count toward the federal child and dependent care credit, which covers up to $3,000 of care expenses for one qualifying child and up to $6,000 for two or more, according to the IRS. Overnight camps do not qualify, but the day camp that keeps your eight-year-old occupied while you work does.
This credit is one of the workhorses of family tax relief, and 2026 happens to be its biggest year in decades. The 2025 tax law raised the maximum credit rate from 35 percent to 50 percent of qualifying expenses starting with tax year 2026, the first expansion of the rate since the early 2000s. That means the care you are paying for right now, this summer, is earning credit under the new, more generous formula when you file next spring.
How the credit is calculated
The math has two parts: your qualifying expenses, capped at $3,000 for one qualifying person or $6,000 for two or more, and your credit rate, which depends on income. For 2026 expenses, the rate starts at 50 percent for the lowest-income families and steps down as adjusted gross income rises, first to 35 percent, then gradually to a floor of 20 percent for higher earners. Nobody who otherwise qualifies gets less than 20 percent, no matter how high their income.
Put together: a family with two kids in qualifying care, $6,000 or more in expenses, gets at least $1,200 (20 percent) and as much as $3,000 (50 percent) knocked off their federal tax bill. One caveat matters for the lowest earners: the credit is nonrefundable, so it can reduce your tax to zero but will not come back as extra refund beyond that.
A note for anyone filing a late or amended 2025 return this year: the 50 percent top rate applies to tax years beginning in 2026. Returns for 2025 use the old structure with its 35 percent maximum.
Who counts as a qualifying person
Three groups qualify. First, and most common, your dependent child under age 13 when the care was provided; the credit stops at the 13th birthday, not the end of that year. Second, a spouse who is physically or mentally incapable of self-care and lived with you more than half the year. Third, another dependent, such as an aging parent, who is incapable of self-care and lived with you more than half the year. That third category makes this credit relevant to the growing number of workers paying for adult day care for a parent while they work.
The work requirement
The expenses must be “work-related”: you paid for care so that you, and your spouse if you are married, could work or actively look for work. On a joint return, both spouses generally need earned income, with a helpful exception that treats a spouse who is a full-time student or incapable of self-care as having earned income. Qualifying expenses also cannot exceed the earned income of the lower-earning spouse.
What counts as care is broader than daycare centers: a nanny or babysitter, a home day care, before- and after-school programs, preschool below kindergarten level, and those summer day camps. What does not count: overnight camp, private school tuition for kindergarten and up, and amounts paid to your spouse, to the child’s other parent, to anyone you claim as a dependent, or to your own child under 19.
The paperwork that trips people up
You claim the credit on Form 2441, and it requires the care provider’s name, address, and taxpayer identification number, a Social Security number for an individual or an EIN for a center. Ask for this information now, while the camp or sitter is happy to provide it, not next April when the phone number is dead. Providers who refuse to give a TIN are usually signaling they do not report the income, which becomes your problem at filing time. Keep receipts or canceled checks tying payments to dates of care.
How the credit interacts with a dependent care FSA
Many employers offer a dependent care flexible spending account, which lets you pay care costs with pretax dollars. The 2025 law raised that program’s annual limit to $7,500 starting in 2026, up from the longtime $5,000. You can use both the FSA and the credit in the same year, but not on the same dollars: expenses reimbursed through the FSA reduce, dollar for dollar, the expenses you can count toward the credit, as the worksheets in IRS Publication 503 walk through.
Which is better depends on your tax bracket and your credit rate. Higher earners at the 20 percent credit rate usually come out ahead running expenses through the FSA, since pretax treatment also skips Social Security and Medicare tax. Lower-income families at or near the 50 percent rate will often do better with the credit. Families with two or more kids and big care bills can sometimes use the FSA fully and still have leftover expenses for the credit.
The theme across all of it: keep records as you go. The family that saves camp invoices and collects the provider’s TIN in June claims this credit effortlessly. The one reconstructing a year of Venmo payments in April usually leaves money behind.
