One of the Pandemic Era’s Biggest Tax Breaks Has Expired

Don’t expect a larger-than-usual tax credit for child care expenses: 2021’s massive expansion of the Child Dependent Care Tax Credit (CDCTC) was a one-time perk that won’t be returning. 

The credit—which pays you back a portion of what you spent on daycare or care for disabled relatives, or other dependents—got a major, but temporary, boost as part of a pandemic relief bill that went into effect in 2021. The expansion was a part of President Joe Biden’s American Rescue Plan and only applied to last year’s taxes. 

Depending on your situation, the amount you get for the CDCTC this time around could be thousands of dollars less than last year. The maximum value of the credit is now $1,050 if you have one dependent and $2,100 for two or more, compared to $4,000 and $8,000 last year.

The expanded credit was one of a multitude of government programs that gave cash directly to households to help them weather the spike in unemployment caused by the COVID-19 pandemic. Tax refunds last year were boosted by hundreds of dollars on average because of the new benefits. But as the economy continued to reopen in 2022 and all the jobs lost in the pandemic came back, those stimulus programs, including the CDCTC, fell by the wayside. 

In 2022, the CDCTC allows you to claim up to $3,000 of expenses if you’re an individual ($6,000 for couples filing jointly), and claim up to 35% of that as a credit, or 20% if your adjusted gross income is more than $43,000.  That’s a sharp decrease from 2021, when individuals could claim up to 50% of expenses up to $8,000 for an individual and $16,000 for a couple. 

Have a question, comment, or story to share? You can reach Diccon at dhyatt@thebalance.com.