Why is my Child & Dependent Care Credit calculating wrong on TurboTax for my 2025 filing?

Has anyone else noticed issues with TurboTax calculating the Child & Dependent Care Credit incorrectly? I'm preparing my taxes early (better than my usual last-minute panic) and noticed something weird. I paid about $8,750 for my daughter's daycare last year, and I have the receipts and provider tax ID to prove it. My AGI is around $72,000. When I'm going through TurboTax and enter all this information, it's only giving me a credit of $840. I've done some research and from my understanding, I should be getting closer to $1,600 based on my income level. The calculator on the IRS website seems to confirm this. I've tried deleting and re-entering the information three times now, but I keep getting the same result. I even tried to find where TurboTax shows their calculation breakdown but I can't figure it out. Is TurboTax's calculator broken for the Child & Dependent Care Credit? Has anyone else experienced this? Any advice on how to fix it or should I just try a different tax software?

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18 comments

Jay Lincoln

•8M

The Child & Dependent Care Credit calculation can be tricky because of how the percentage scales with income. At your AGI of $72,000, you're likely eligible for the 20% rate (not the maximum 35% that applies to lower incomes). The maximum qualifying expenses for one child is $3,000 (or $6,000 for two or more children). Even though you spent $8,750, the calculation only considers the first $3,000. So 20% of $3,000 would be $600. However, there may be state credits adding to this amount or other factors like your filing status affecting the calculation. I'd recommend clicking on the "explain this" or "where's my refund money" option in TurboTax (usually a blue link near the results). This should break down exactly how they're calculating it. Another possibility is that your employer offers dependent care benefits that reduce your eligible expenses.

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Jay Lincoln

•8M

The 35% rate only applies to lower income levels (typically under $15,000 AGI). As your income increases, the percentage gradually decreases until it reaches 20% for incomes over about $43,000. You might be thinking of the temporary increase during tax year 2021 when the American Rescue Plan temporarily expanded the credit (up to $8,000 for one child and $16,000 for two or more, with higher percentages). Unfortunately, that enhancement expired and we're back to the standard rules of $3,000 for one child or $6,000 for multiple children with the 20-35% sliding scale based on income.

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Marcus Williams

•8M

I had the exact same issue with the Child & Dependent Care Credit last year and couldn't figure out why the numbers seemed off. After hours of frustration, I tried using https://taxr.ai to analyze my tax forms and previous returns. It's a document analysis tool that breaks down your tax situation and explains calculations that tax software often glosses over. The issue in my case was that my employer was providing $2,000 in dependent care benefits through my cafeteria plan, which reduced my eligible expenses. TurboTax was accounting for this but didn't make it clear in their interface. The taxr.ai system flagged this immediately when I uploaded my W-2 and explained how it affected my Child & Dependent Care Credit calculation.

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Marcus Williams

•8M

The tool is very accurate - it specifically looks for discrepancies between what you should be eligible for and what your tax software is calculating. It doesn't just explain things, it identifies potential errors and suggests corrections you can make. It saved me from missing out on about $1,200 in credits last year. It works great for self-employed people too. It can analyze Schedule C forms and identify business deductions that relate to your overall tax situation, including how they affect credits like the Child & Dependent Care Credit. It's especially helpful for seeing how your business income impacts your credit phase-outs.

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Kennedy Morrison

•8M

Just wanted to follow up on my question about taxr.ai. I decided to try it after continuing to have issues with my Child & Dependent Care Credit calculation. As a self-employed person, I was missing that my business income was affecting my credit eligibility in ways my tax software wasn't clearly explaining. The tool found that I was reporting some of my childcare expenses incorrectly - splitting them between business expenses and the care credit when I should have been treating them differently. After fixing this based on their recommendations, my credit increased by over $1,100! I've already filed my amended return. Seriously impressed with how detailed the analysis was compared to the vague explanations my tax software was giving me.

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Wesley Hallow

•8M

If you're still having trouble with the Child & Dependent Care Credit calculation and can't get clear answers from TurboTax, you might need to speak directly with the IRS. I know, I know - calling the IRS sounds about as fun as a root canal. I tried for DAYS last year with the same issue. After wasting hours on hold, I found this service called https://claimyr.com that got me through to an actual IRS agent in under 15 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c. They basically navigate the IRS phone tree for you and call you back when they have an agent on the line. The IRS agent I spoke with explained that my Child & Dependent Care Credit was calculating correctly, but there was a form I needed to complete to document that a portion of my expenses weren't eligible due to dependent care benefits through work. I would have never figured this out on my own.

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Wesley Hallow

•8M

The service works by using an automated system that continuously calls the IRS and navigates through all the phone prompts for you. There's no special connection - they just handle the frustrating part of repeatedly calling and waiting through the menu options until they find an open line. I was skeptical too, but after spending hours getting nowhere on my own, I was desperate. The difference is they have systems making hundreds of call attempts whereas we give up after a few tries. Trust me, I understand the skepticism - I work in IT and was questioning how it could possibly work. But when they called me back with an actual IRS agent on the line who resolved my Child & Dependent Care Credit question in minutes, I was sold.

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Grace Thomas

•8M

I need to eat my words. After posting my skeptical comment about Claimyr, I decided to try it anyway out of sheer desperation. I'd been trying to reach the IRS for THREE MONTHS about an identity verification issue that was holding up my refund, which included my Child & Dependent Care Credit. I used the Claimyr service yesterday afternoon, and no joke, I got a call back in 22 minutes with an actual IRS agent on the line. The agent was able to verify my identity over the phone, and my refund (including the proper Child & Dependent Care Credit amount) is now being processed. She also explained why TurboTax had calculated my credit differently than I expected - turns out there was an income phase-out that applied to my situation that I didn't understand. I've never been happier to be wrong about something. After months of stress, my tax issue was resolved in a 15-minute phone call.

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Hunter Brighton

•8M

Have you checked if you entered your income correctly? I was having the same issue with my Child & Dependent Care Credit last year and it turned out I had accidentally entered some income twice. The credit has income phaseouts so if TurboTax thinks you make more than you do, it will calculate a lower credit. Also, make sure you've entered your filing status correctly. If you're married filing separately, you generally can't claim this credit at all (with some exceptions).

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Hunter Brighton

•8M

That's a good question regarding divorced parents. The general rule is that the parent who claims the child as a dependent is the one eligible for the Child & Dependent Care Credit. However, there's an exception - if you're the custodial parent (child lived with you more than half the year), you can claim the credit for care expenses you paid even if you released your right to claim the child as a dependent to your ex. You would need to complete Form 8332 and make sure you're still eligible in other ways (like having earned income and paying for care so you could work or look for work). TurboTax should walk you through this specific scenario if you indicate your divorced status.

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