IRC §21 · §129 · Form 2441
Dependent Care Calculator — Credit + FSA
OBBB rewrote both halves for 2026: the Dependent Care FSA jumped from $5,000 to $7,500 (the first permanent raise since 1986; a one-year $10,500 limit applied only in 2021), and the §21 credit got a new top-loaded rate curve.
Part 1 — Child & Dependent Care Credit
Estimated tax before credits: $10,040 (AGI minus the 2026 standard deduction, ordinary brackets).
Credit result
$2,100
Usable this year (limited to your tax)
- Applicable percentage: 35%
- Expense cap (2+ kids): $6,000
- Creditable expenses: $6,000
- Computed credit: $2,100
- Tax it can offset: $10,040
Honesty note: the credit is nonrefundable — it cannot exceed your federal tax liability, so the figure above is capped at the tax you entered (or our estimate). Other credits claimed before it (such as the foreign tax credit) are subtracted first. EITC interaction is not modeled.
Part 2 — FSA vs credit decision
The §129 dependent-care FSA lets you exclude up to $7,500 for 2026 — the new OBBB limit (the first permanent raise since 1986). Dollars run through the FSA escape both federal income tax AND employee FICA (7.65% on wages up to the Social Security wage base; 1.45% above it). But under §21(c), those same dollars reduce the credit's expense cap dollar-for-dollar — no double-dip. Only care you actually pay is reimbursed: election dollars above your care costs are forfeited, and reimbursements above the lower earner's earned income are taxable.
With the standard deduction, $120,000 of AGI is in the 12% bracket for 2026.
FSA strategy
$1,333
- FSA tax savings: $983
- Formula: $5,000 × (12% + 7.65% FICA)
- + residual credit: $350
Credit only (no FSA)
$2,100
- Applicable %: 35%
- Creditable expenses: $6,000
- Nonrefundable — capped at your tax liability.
Recommended: skip the FSA, take the credit
No double-dip (§21(c)). Every dollar excluded via the FSA reduces the credit's expense cap by the same dollar. A max $7,500 FSA election with two qualifying kids leaves the cap at $0 — the credit zeroes out entirely.
2026 rate anchors (MFJ)
- AGI 15,000 → 50%
- AGI 20,000 → 47%
- AGI 30,000 → 42%
- AGI 43,000 → 36%
- AGI 60,000 → 35%
- AGI 150,000 → 35%
- AGI 180,000 → 27%
- AGI 210,000 → 20%
Related resources
Sources & References
Primary references used for this content
Child and Dependent Care Expenses
Form used to claim the §21 credit and reconcile §129 FSA benefits.
View on irs.gov
Child and Dependent Care Expenses
Qualification rules, worked examples, definitions of qualifying persons and providers.
View on irs.gov
Expenses for household and dependent care services
Statutory basis for the credit; OBBB rewrote the applicable-percentage curve for 2026.
View on law.cornell.edu
Dependent care assistance programs
Statutory basis for the DCFSA; OBBB raised the limit to $7,500 for taxable years beginning after 2025.
View on law.cornell.edu
✓4 primary sources; links re-checked on a weekly rotation by the source watcher
Disclaimer: This calculator provides estimates for educational purposes only. Not tax, legal, or financial advice. Results may vary based on your specific circumstances. Consult a qualified CPA or tax professional for personalized guidance.