NEW Dependent Care Benefits for 2021
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$12,000 work-related expenses<br />
-$ 7,000 DCBs<br />
$ 5,000 maximum work-related expenses <strong>for</strong> the child and dependent care credit.<br />
Since Michal’s and Aniela’s AGI is less than $125,000, their credit percentage is the<br />
maximum 50%.<br />
$5,000 × 50% = $2,500<br />
If Michal did not receive DCBs, they could have used the full $12,000 work-related<br />
expenses to calculate the credit and their credit would have been $6,000. Or, if Michal<br />
had opted <strong>for</strong> the maximum pre-tax contribution of $10,500, their credit would be<br />
calculated based only on the remaining $1,500 of eligible expenses and their credit<br />
would have been $750. Although the <strong>2021</strong> credit is more generous, the <strong>for</strong>mula <strong>for</strong><br />
calculating the child and dependent care credit when a taxpayer also receives DCBs<br />
has not changed.<br />
The expanded child and dependent care credit and DCB rules expire after <strong>2021</strong> unless<br />
extended.
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