What this line means
The percentage applied to your allowable expenses to calculate the credit. The percentage starts at 35% for adjusted gross income (AGI) of $15,000 or less and decreases by one percentage point for each $2,000 (or fraction of $2,000) of AGI above $15,000. It floors at 20% once AGI exceeds $43,000. 1
For most filers, the percentage is 20%. Multiply this percentage by your allowable expenses on line 8 to get your credit amount on line 9b. A family with $50,000 AGI and $6,000 in allowable expenses gets a credit of $1,200 (20% x $6,000). A family earning $20,000 with the same expenses gets $1,980 (33% x $6,000). 2
Does this apply to you?
- You have a positive amount on line 8 (allowable expenses)
- Your AGI is $15,000 or less (you get the maximum 35% rate)
- Your AGI is between $15,001 and $43,000 (your rate falls between 34% and 21%)
- Your AGI is above $43,000 (your rate is 20%)
Easy to overlook
Lower-income filers get a higher credit percentage The sliding scale rewards lower earners with a percentage nearly double what higher earners receive. A family with $15,000 AGI gets 35% of their expenses back, while a family with $80,000 AGI gets 20%. Filers in the lower brackets who skip this credit because they assume it is “not worth it” leave significant money on the table. 2 IRS Publication 503 — Credit percentage table
Fractional brackets round against you If your AGI is $15,001, you have crossed into the next $2,000 bracket and your percentage drops to 34%. The IRS does not prorate within a bracket — any amount above a threshold, even $1, moves you to the next lower percentage. 1 IRS Form 2441 instructions — Line 9
Watch out for this
Your AGI for this calculation is your adjusted gross income from Form 1040, line 11a — not your taxable income, not your gross income, and not your earned income from line 4 of this form. Using the wrong income figure produces the wrong percentage. An AGI of $42,500 gives you 21%, but if you mistakenly use your gross income of $48,000, you would apply 20% and shortchange yourself.
Footnotes
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IRS Form 2441 Instructions, Line 9 — Credit Percentage. https://www.irs.gov/pub/irs-pdf/i2441.pdf ↩ ↩2
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IRS Publication 503, Child and Dependent Care Expenses, How to Figure the Credit. https://www.irs.gov/pub/irs-pdf/p503.pdf ↩ ↩2