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2021 Instructions for Form 2441 Child and Dependent Care Expenses Department of the Treasury Internal Revenue Service Section references are to the Internal Revenue Code unless otherwise noted. Future Developments For the latest information about developments related to Form 2441 and its instructions, such as legislation enacted after they were published, go to IRS.gov/ Form2441. What’s New Changes to the credit for child and dependent care expenses for 2021. For 2021, the American Rescue Plan Act of 2021 (the ARP) increases the amount of the credit for child and dependent care expenses. It also makes the credit refundable for taxpayers that meet certain residency requirements, increases the percentage of employment-related expenses for qualifying care considered in calculating the credit, and modifies the phaseout of the credit for higher earners. For 2021, you may claim the credit on qualifying employment-related expenses of up to $8,000 (previously $3,000) if you had one qualifying person, or $16,000 (previously $6,000) if you had two or more qualifying persons. The maximum credit in 2021 increases to 50% of your employment-related expenses, which equals a maximum credit of $4,000 if you had one qualifying person (50% of $8,000), or $8,000 (50% of $16,000) if you had two or more qualifying persons. The more a taxpayer earns, the lower the percentage of employment-related expenses that are considered in determining the credit. Under the ARP, the adjusted gross income level at which the credit percentage starts to phase out is raised to $125,000 for 2021. Above $125,000, the 50% credit percentage goes down as income rises. For 2021, the credit figured on line 9a is unavailable for any taxpayer with adjusted gross income over $438,000; however, you may still be eligible to claim a credit on line 9b. See the instructions for line 8 for the 2021 phaseout schedule. To see if you meet the residency requirements to qualify for the refundable credit, see the instructions for line B. The refundable credit is reported on line 10. The nonrefundable credit is reported on line 11. For more information about the credit, see Pub. 503, Child and Dependent Care Expenses, available at IRS.gov/Pub503, and frequently asked questions at IRS.gov/CDCCFAQS. Changes to dependent care benefits for 2021. The ARP permits employers to increase the maximum amount that can be excluded from an employee’s income through a dependent care assistance program. For 2021, the maximum amount is increased to $10,500 (previously $5,000). For married employees filing separate returns, the maximum amount is increased to $5,250 (previously $2,500). Dependent care benefits are reported on line 12. Temporary special rules for dependent care flexible spending arrangements (FSAs). Section 214 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020 provides temporary COVID-19 relief for dependent care FSAs. This legislation allows employers to amend their dependent care plan to allow unused amounts to be used in a subsequent year. It also allows employers to amend their dependent care plan to allow participants to use amounts in a subsequent year if a dependent turned 13 before the funds were used. Unused amounts from 2020 are added to the maximum amount of dependent care benefits that are allowed for 2021. See the instructions for line 13. New checkbox on line 1, column (d). There is a new checkbox on line 1, column (d), for you to indicate if your care provider is your household employee. See column (d), under line 1, later. Credit for prior year’s expenses and worksheet for 2020 expenses paid in 2021. The credit for prior year’s expenses is now reported separately on line 9b. Previously, it was added to the current year credit and reported together on one line. We moved Worksheet A, Worksheet for 2020 Expenses Paid in 2021, from Pub. 503 to the end of these instructions. If you paid 2020 expenses in 2021, you must complete Worksheet A to figure the amount to enter on line 9b. See the instructions for line 9b. Reminders Married persons filing separately checkbox on line A. Generally, married persons must file a joint return to claim the credit. If you claim the credit and your filing status is married filing separately, you are required to show you meet the special requirements listed later under Married Persons Filing Separately by checking the checkbox located on line A above Part I on Form 2441. See Line A, later, for more information. Purpose of Form If you paid someone to care for your child or other qualifying person so you (and your spouse if filing jointly) could work or look for work in 2021, you may be able to take the credit for child and dependent care expenses. In addition, if you (or your spouse if filing jointly) received any dependent care benefits for 2021, you must use Form 2441 to figure the amount, if any, of the benefits you can exclude from your income. You must complete Part III of Form 2441 before you can figure the credit, if any, in Part II. You (and your spouse if filing jointly) must have earned income to take the credit or exclude dependent care benefits from your income. But see If You or Your Spouse Dec 16, 2021 Cat. No. 10842K