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Childcare is expensive—there’s no sugarcoating it. If you're a parent in East Brunswick or Cranford, you’re likely paying anywhere from $900 to $1,400 a month per child for daycare, aftercare, or summer camp. The good news? There’s real financial relief built into the tax code—if you know how to claim it.

The Child and Dependent Care Credit can significantly reduce your tax bill. At TaxProCPA, we’ve helped families across Central New Jersey use this credit to offset thousands in childcare costs. Let’s break down how it works and what local families need to know.

What Is the Child and Dependent Care Credit?

This is a federal tax credit that helps working parents recover part of their out-of-pocket childcare expenses. Unlike deductions, which reduce your taxable income, tax credits reduce the amount you owe directly.

For 2024, you can claim:

• Up to $3,000 in expenses for one qualifying child, or

• Up to $6,000 for two or more qualifying children

The IRS then applies a percentage (between 20% and 35%) based on your income to determine your credit amount.

Note: In most years, including 2024, this credit is nonrefundable. That means it can lower your tax bill to zero—but won’t generate a refund beyond that.

Who Qualifies for the Credit?

The requirements are straightforward, but you’ll need to check every box:

• You (and your spouse if filing jointly) must have earned income from work or self-employment.

• The care must be for a dependent child under age 13.

• The purpose of care must be to enable you to work or actively look for work.

• The care provider cannot be:

  • Your spouse

  • The child’s parent

  • Anyone you claim as a dependent

  • Your child under the age of 19

• For divorced or separated parents, only the custodial parent—the one the child lives with most—can typically claim the credit.

If you’re a dual-working couple in Cranford with a toddler in daycare, or a single working parent in East Brunswick juggling work and aftercare pickups, chances are, you qualify.

What Counts as a Childcare Expense?

Not all expenses are eligible, and getting this right is key to staying compliant and maximizing your benefit.

Qualifying expenses include:

• Licensed daycare or childcare centers

• In-home care by a nanny or babysitter (if properly reported)

• Before- and after-school programs

• Preschool programs (not kindergarten or higher)

• Daytime summer camps (overnight camps do not qualify)

Non-qualifying expenses include:

• Tuition for kindergarten or higher grades

• Overnight summer camps

• Sports or enrichment programs not related to care

• Payments to relatives under age 19 or to a parent of the child

Pro tip: Always request documentation. You’ll need the provider’s name, address, and Tax ID (EIN or SSN), along with receipts or bank records.

How Much Can You Get Back?

Here’s how the math works:

• You can claim up to 35% of your eligible expenses—but this percentage decreases as your income increases.

• Most middle-income families (earning between $43,000 and $125,000) receive 20% of qualified expenses as a tax credit.

Example 1 – Dual-Income Family in East Brunswick:
Maria and Derek earn a combined $100,000 and pay $12,000 a year for care for two children. They can claim $6,000 in eligible expenses and receive a 20% credit—$1,200 off their tax bill.

Example 2 – Single Parent in Cranford:
Jamie earns $45,000 and pays $6,500 annually for aftercare for one child. She qualifies for a 30% credit on $3,000, resulting in a $900 tax credit.

These credits are applied directly to what you owe—making them more powerful than a deduction.

Can You Use a Dependent Care FSA Too?

Yes, but there’s a catch.

If your employer offers a Dependent Care Flexible Spending Account (FSA), you can contribute up to $5,000 in pre-tax income to pay for childcare. This reduces your taxable income and offers upfront savings.

However, any amount you use through your FSA reduces the expenses you can claim under the Child and Dependent Care Credit.

If you use the full $5,000 FSA, you can only apply $1,000 of additional expenses toward the tax credit. The trick is figuring out which combination of credit and FSA gives you the better result. This is exactly where a tax professional can help.

What You Need to File

To claim the credit, you’ll need to:

• Complete IRS Form 2441, attached to your Form 1040

• Provide your care provider’s:

  • Name

  • Address

  • Taxpayer Identification Number (EIN or SSN)

• Keep documentation for:

  • Payment receipts or canceled checks

  • Service contracts or schedules

  • Dates of service and amount paid

Avoid common errors like listing incorrect Tax ID numbers or mixing ineligible expenses. These can delay your refund or cause disqualification.

What’s Specific to East Brunswick and Cranford?

Local childcare costs in Middlesex and Union counties are among the highest in New Jersey. That means East Brunswick and Cranford families stand to benefit more from available tax credits than families in lower-cost areas.

Most licensed centers and in-home care providers in this region meet IRS requirements, but always confirm that your provider is willing to supply a valid Tax ID and documentation. Some families miss out simply because their provider won’t provide the necessary details.

Also, don’t forget that New Jersey offers its own version of the Child and Dependent Care Credit for lower-income households. It’s not as generous, but if your adjusted gross income is below certain thresholds, it could offer an extra $100–$500 in savings.

Why Work with a Tax Professional?

While claiming this credit might sound simple, integrating it with your other deductions, employer benefits, and filing strategy takes careful planning.

At TaxProCPA, we help local families:

• Identify which credits and benefits apply

• Coordinate Dependent Care FSAs and credits for maximum savings

• Avoid common filing errors

• Plan ahead for next year’s childcare expenses

For many working parents, we’ve saved hundreds—sometimes thousands—of dollars they would have otherwise left on the table.

If you’re paying for childcare so you can work, the tax code is designed to help you—but you have to know how to use it. From local preschool costs to summer day camps and aftercare programs, the expenses add up quickly. So do the savings, when you apply the credit properly.

Need help making sense of it all?

Schedule a free consultation with us today. We’ll walk you through the requirements, review your past filings if needed, and build a strategy that saves you money now—and in the future.