Internal Revenue Code:Sec. 21. Expenses for household and dependent care services necessary for gainful employment
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Location in Internal Revenue Code
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter A - Determination of Tax Liability
PART IV - CREDITS AGAINST TAX
Subpart A - Nonrefundable Personal Credits
Statute
Sec. 21. Expenses for household and dependent care services
necessary for gainful employment
(a) Allowance of credit
(1) In general
In the case of an individual for which there
are 1 or more qualifying individuals (as defined in
subsection (b)(1)) with respect to such individual), there
shall be allowed as a credit against the tax imposed by this
chapter for the taxable year an amount equal to the applicable
percentage of the employment-related expenses (as defined in
subsection (b)(2))paid by such individual during the taxable year.
(2) Applicable percentage defined
For purposes of paragraph (1), the term ''applicable
percentage'' means 35 percent reduced (but not below 20 percent)
by 1 percentage point for each $2,000 (or fraction thereof) by
which the taxpayer's adjusted gross income for the taxable year
exceeds $15,000.
(b) Definitions of qualifying individual and employment-related
expenses
For purposes of this section -
(1) Qualifying individual.--The term `qualifying
individual' means--
(A) a dependent of the taxpayer (as defined in
section 152(a)(1)) who has not attained age 13,
(B) a dependent of the taxpayer (as defined in section 152,
determined without regard to subsections (b)(1),
(b)(2), and (d)(1)(B)) who is physically
or mentally incapable of caring for himself or herself
and who has the same principal place of abode as the
taxpayer for more than one-half of such taxable year, or
(C) the spouse of the taxpayer, if the spouse is
physically or mentally incapable of caring for himself
or herself and who has the same principal place of abode
as the taxpayer for more than one-half of such taxable year.
(2) Employment-related expenses
(A) In general
The term ''employment-related expenses'' means amounts paid
for the following expenses, but only if such expenses are
incurred to enable the taxpayer to be gainfully employed for
any period for which there are 1 or more qualifying individuals
with respect to the taxpayer:
(i) expenses for household services, and
(ii) expenses for the care of a qualifying individual.
Such term shall not include any amount paid for services
outside the taxpayer's household at a camp where the qualifying
individual stays overnight.
(B) Exception
Employment-related expenses described in subparagraph (A)
which are incurred for services outside the taxpayer's
household shall be taken into account only if incurred for the
care of -
(i) a qualifying individual described in paragraph (1)(A),
or
(ii) a qualifying individual (not described in paragraph
(1)(A)) who regularly spends at least 8 hours each day in the
taxpayer's household.
(C) Dependent care centers
Employment-related expenses described in subparagraph (A)
which are incurred for services provided outside the taxpayer's
household by a dependent care center (as defined in
subparagraph (D)) shall be taken into account only if -
(i) such center complies with all applicable laws and
regulations of a State or unit of local government, and
(ii) the requirements of subparagraph (B) are met.
(D) Dependent care center defined
For purposes of this paragraph, the term ''dependent care
center'' means any facility which -
(i) provides care for more than six individuals (other than
individuals who reside at the facility), and
(ii) receives a fee, payment, or grant for providing
services for any of the individuals (regardless of whether
such facility is operated for profit).
(c) Dollar limit on amount creditable
The amount of the employment-related expenses incurred during any
taxable year which may be taken into account under subsection (a)
shall not exceed -
(1) $3,000 if there is 1 qualifying individual with respect to
the taxpayer for such taxable year, or
(2) $6,000 if there are 2 or more qualifying individuals with
respect to the taxpayer for such taxable year.
The amount determined under paragraph (1) or (2) (whichever is
applicable) shall be reduced by the aggregate amount excludable
from gross income under section 129 for the taxable year.
(d) Earned income limitation
(1) In general
Except as otherwise provided in this subsection, the amount of
the employment-related expenses incurred during any taxable year
which may be taken into account under subsection (a) shall not
exceed -
(A) in the case of an individual who is not married at the
close of such year, such individual's earned income for such
year, or
(B) in the case of an individual who is married at the close
of such year, the lesser of such individual's earned income or
the earned income of his spouse for such year.
(2) Special rule for spouse who is a student or incapable of
caring for himself
In the case of a spouse who is a student or a qualifying
individual described in subsection (b)(1)(C), for purposes of
paragraph (1), such spouse shall be deemed for each month during
which such spouse is a full-time student at an educational
institution, or is such a qualifying individual, to be gainfully
employed and to have earned income of not less than -
(A) $250 if subsection (c)(1) applies for the taxable year,
or
(B) $500 if subsection (c)(2) applies for the taxable year.
In the case of any husband and wife, this paragraph shall apply
with respect to only one spouse for any one month.
(e) Special rules
For purposes of this section -
(1) Place of abode.--An individual shall not be treated as
having the same principal place of abode of the taxpayer if at
any time during the taxable year of the taxpayer the
relationship between the individual and the taxpayer is in
violation of local law.
(2) Married couples must file joint return
If the taxpayer is married at the close of the taxable year,
the credit shall be allowed under subsection (a) only if the
taxpayer and his spouse file a joint return for the taxable year.
(3) Marital status
An individual legally separated from his spouse under a decree
of divorce or of separate maintenance shall not be considered as
married.
(4) Certain married individuals living apart
If -
(A) an individual who is married and who files a separate
return -
(i) maintains as his home a household which constitutes for
more than one-half of the taxable year the principal place of
abode of a qualifying individual, and
(ii) furnishes over half of the cost of maintaining such
household during the taxable year, and
(B) during the last 6 months of such taxable year such
individual's spouse is not a member of such household,
such individual shall not be considered as married.
(5) Special dependency test in case of divorced parents, etc.
If -
(A) section 152(e) applies to any child with respect to any
calendar year, and
(B) such child is under the age of 13 or is physically or
mentally incapable of caring for himself,
in the case of any taxable year beginning in such calendar year,
such child shall be treated as a qualifying individual described
in subparagraph (A) or (B) of subsection (b)(1) (whichever is
appropriate) with respect to the custodial parent (as defined in
section 152(e)(3)(A)), and shall not be treated as a
qualifying individual with respect to the noncustodial parent.
(6) Payments to related individuals
No credit shall be allowed under subsection (a) for any amount
paid by the taxpayer to an individual -
(A) with respect to whom, for the taxable year, a deduction
under section 151(c) (relating to deduction for personal
exemptions for dependents) is allowable either to the taxpayer
or his spouse, or
(B) who is a child of the taxpayer (within the meaning of
section 152(f)(1)) who has not attained the age of 19 at the
close of the taxable year.
For purposes of this paragraph, the term ''taxable year'' means
the taxable year of the taxpayer in which the service is
performed.
(7) Student
The term ''student'' means an individual who during each of 5
calendar months during the taxable year is a full-time student at
an educational organization.
(8) Educational organization
The term ''educational organization'' means an educational
organization described in section 170(b)(1)(A)(ii).
(9) Identifying information required with respect to service
provider
No credit shall be allowed under subsection (a) for any amount
paid to any person unless -
(A) the name, address, and taxpayer identification number of
such person are included on the return claiming the credit, or
(B) if such person is an organization described in section
501(c)(3) and exempt from tax under section 501(a), the name
and address of such person are included on the return claiming
the credit.
In the case of a failure to provide the information required
under the preceding sentence, the preceding sentence shall not
apply if it is shown that the taxpayer exercised due diligence in
attempting to provide the information so required.
(10) Identifying information required with respect to qualifying
individuals
No credit shall be allowed under this section with respect to
any qualifying individual unless the TIN of such individual is
included on the return claiming the credit.
(f) Regulations
The Secretary shall prescribe such regulations as may be
necessary to carry out the purposes of this section.
Sources
(Added Pub. L. 94-455, title V, Sec. 504(a)(1), Oct. 4, 1976, 90
Stat. 1563, Sec. 44A; amended Pub. L. 95-600, title I, Sec. 121(a),
Nov. 6, 1978, 92 Stat. 2779; Pub. L. 97-34, title I Sec. 124
(a)-(d), Aug. 13, 1981, 95 Stat. 197, 198; Pub. L. 98-21, title I,
Sec. 122(c)(1), Apr. 20, 1983, 97 Stat. 87; renumbered Sec. 21 and
amended Pub. L. 98-369, div. A, title IV, Sec. 423(c)(4), 471(c),
474(c), July 18, 1984, 98 Stat. 801, 826, 830; Pub. L. 99-514,
title I, Sec. 104(b)(1), Oct. 22, 1986, 100 Stat. 2104; Pub. L.
100-203, title X, Sec. 10101(a), Dec. 22, 1987, 101 Stat. 1330-384;
Pub. L. 100-485, title VII, Sec. 703(a)-(c)(1), Oct. 13, 1988, 102
Stat. 2426, 2427; Pub. L. 104-188, title I, Sec. 1615(b), Aug. 20,
1996, 110 Stat. 1853; Pub. L. 107-16, title II, Sec. 204(a), (b),
June 7, 2001, 115 Stat. 49.)
Amendment of Section
AMENDMENT OF SECTION
For termination of amendment by section 901 of Pub. L. 107-16,
see Effective and Termination Dates of 2001 Amendment note below.
Miscellaneous
PRIOR PROVISIONS
A prior section 21 was renumbered section 15 of this title.
AMENDMENTS
2004 - Pub. L. 108-311 Sec. 203 amends Subsec (a)(1) and
Subsec. (b)(1) and Subsec. (e)(1).
PL018-311 Sec 207(2) amends subsec. (e)(5)(A)&(B) and (e)(6)(B).
2002 - Subsec. 418(a)and(b); Pub. L. 107-147, amends Sec. 21
(d)(2)(A)and (B)and makes the amendments effective as if
included in the provisions of the Economic Growth and Tax
Relief Reconciliation Act of 2001.
2001 - Subsec. (a)(2). Pub. L. 107-16, Sec. 204(b), 901,
temporarily substituted ''35 percent'' for ''30 percent'' and
''$15,000'' for ''$10,000''. See Effective and Termination Dates of
2001 Amendment note below.
Subsec. (c)(1). Pub. L. 107-16, Sec. 204(a)(1), 901, temporarily
substituted ''$3,000'' for ''$2,400''. See Effective and
Termination Dates of 2001 Amendment note below.
Subsec. (c)(2). Pub. L. 107-16, Sec. 204(a)(2), 901, temporarily
substituted ''$6,000'' for ''$4,800''. See Effective and
Termination Dates of 2001 Amendment note below.
1996 - Subsec. (e)(10). Pub. L. 104-188 added par. (10).
1988 - Subsec. (b)(1)(A). Pub. L. 100-485, Sec. 703(a),
substituted ''age of 13'' for ''age of 15''.
Subsec. (c). Pub. L. 100-485, Sec. 703(b), inserted at end: ''The
amount determined under paragraph (1) or (2) (whichever is
applicable) shall be reduced by the aggregate amount excludable
from gross income under section 129 for the taxable year.''
Subsec. (e)(5)(B). Pub. L. 100-485, Sec. 703(a), substituted
''age of 13'' for ''age of 15''.
Subsec. (e)(9). Pub. L. 100-485, Sec. 703(c)(1), added par. (9).
1987 - Subsec. (b)(2)(A). Pub. L. 100-203 inserted at end ''Such
term shall not include any amount paid for services outside the
taxpayer's household at a camp where the qualifying individual
stays overnight.''
1986 - Subsecs. (b)(1)(A), (e)(6)(A). Pub. L. 99-514, Sec.
104(b)(1)(A), substituted ''section 151(c)'' for ''section
151(e)''.
Subsec. (e)(6)(B). Pub. L. 99-514, Sec. 104(b)(1)(B), substituted
''section 151(c)(3)'' for ''section 151(e)(3)''.
1984 - Pub. L. 98-369, Sec. 471(c), renumbered section 44A of
this title as this section.
Subsec. (a)(1). Pub. L. 98-369, Sec. 474(c)(2), (3), substituted
''subsection (b)(1)'' for ''subsection (c)(1)'' and ''subsection
(b)(2)'' for ''subsection (c)(2)''.
Subsec. (b). Pub. L. 98-369, Sec. 474(c)(1), redesignated subsec.
(c) as (b). Former subsec. (b), which provided that the credit
allowed by subsec. (a) could not exceed the amount of the tax
imposed by this chapter for the taxable year reduced by the sum of
the credits allowable under sections 33, 37, 38, 40, 41, 42, and
44, was struck out.
Subsec. (c). Pub. L. 98-369, Sec. 474(c)(1), redesignated subsec.
(d) as (c). Former subsec. (c) redesignated (b).
Subsec. (d). Pub. L. 98-369, Sec. 474(c)(1), redesignated subsec.
(e) as (d). Former subsec. (d) redesignated (c).
Subsec. (d)(2). Pub. L. 98-369, Sec. 474(c)(4), substituted
''subsection (b)(1)(C)'' for ''subsection (c)(1)(C)'' in
introductory provisions.
Subsec. (d)(2)(A). Pub. L. 98-369, Sec. 474(c)(5), substituted
''subsection (c)(1)'' for ''subsection (d)(1)''.
Subsec. (d)(2)(B). Pub. L. 98-369, Sec. 474(c)(6), substituted
''subsection (c)(2)'' for ''subsection (d)(2).
Subsec. (e). Pub. L. 98-369, Sec. 474(c)(1), redesignated subsec.
(f) as (e). Former subsec. (e) redesignated (d).
Subsec. (e)(5). Pub. L. 98-369, Sec. 474(c)(7), substituted
''subsection (b)(1)'' for ''subsection (c)(1)'' in provisions
following subpar. (B).
Pub. L. 98-369, Sec. 423(c)(4), amended par. (5) generally,
substituting subpars. (A) and (B) reading:
''(A) paragraph (2) or (4) of section 152(e) applies to any
child with respect to any calendar year, and
''(B) such child is under the age of 15 or is physically or
mentally incapable of caring for himself,''
for former provisions:
''(A) a child (as defined in section 151(e)(3)) who is under
the age of 15 or who is physically or mentally incapable of
caring for himself receives over half of his support during the
calendar year from his parents who are divorced or legally
separated under a decree of divorce or separate maintenance or
who are separated under a written separation agreement, and
''(B) such child is in the custody of one or both of his
parents for more than one-half of the calendar year.''
and substituted in concluding text ''(whichever is appropriate)
with respect to the custodial parent (within the meaning of section
152(e)(1)), and shall not be treated as a qualifying individual
with respect to the noncustodial parent'' for '', as the case may
be, with respect to that parent who has custody for a longer period
during such calendar year than the other parent, and shall not be
treated as being a qualifying individual with respect to such other
parent.''
Subsecs. (f), (g). Pub. L. 98-369, Sec. 474(c)(1), redesignated
subsecs. (f) and (g) as (e) and (f), respectively.
1983 - Subsec. (b)(2). Pub. L. 98-21 substituted ''relating to
credit for the elderly and the permanently and totally disabled''
for ''relating to credit for the elderly''.
1981 - Subsec. (a). Pub. L. 97-34, Sec. 124(a), designated
existing provisions as par. (1), substituted ''the applicable
percentage'' for ''20 percent'' in par. (1) as so designated, and
added par. (2).
Subsec. (c)(2)(B). Pub. L. 97-34, Sec. 124(c), designated
existing provisions as cl. (i) and added cl. (ii).
Subsec. (c)(2)(C), (D). Pub. L. 97-34, Sec. 124(d), added
subpars. (C) and (D).
Subsec. (d)(1). Pub. L. 97-34, Sec. 124(b)(1)(A), substituted
''$2,400'' for ''$2,000''.
Subsec. (d)(2). Pub. L. 97-34, Sec. 124(b)(1)(B), substituted
''$4,800'' for ''$4,000''.
Subsec. (e)(2)(A). Pub. L. 97-34, Sec. 124(b)(2)(A), substituted
''$200'' for ''$166''.
Subsec. (e)(2)(B). Pub. L. 97-34, Sec. 124(b)(2)(B), substituted
''$400'' for ''$333''.
1978 - Subsec. (f)(6). Pub. L. 95-600 substituted provision
disallowing a credit for any amount paid by a taxpayer to an
individual with respect to whom, for the taxable year, a deduction
under section 151(e) is allowable either to the taxpayer or his
spouse or who is a child of the taxpayer who has not attained the
age of 19 at the close of the taxpayer year and defining ''taxpayer
year'' for provision disallowing a credit for any amount paid by
the taxpayer to an individual bearing a relationship described in
section 152(a)(1) through (8), or a dependent described in section
152(a)(9), except that a credit was allowed for an amount paid by a
taxpayer to an individual with respect to whom, for the taxable
year of the taxpayer in which the service was performed, neither
the taxpayer nor his spouse was entitled to a deduction under
section 151(e), provided the service constituted employment within
the meaning of section 3121(b).
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT
Pub. L. 107-16, title II, Sec. 204(c), June 7, 2001, 115 Stat.
50, provided that: ''The amendments made by this section (amending
this section) shall apply to taxable years beginning after December
31, 2002.''
Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or
limitation years beginning after Dec. 31, 2010, and the Internal
Revenue Code of 1986 to be applied and administered to such years
as if such amendment had never been enacted, see section 901 of
Pub. L. 107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1996 AMENDMENT
Section 1615(d) of Pub. L. 104-188 provided that:
''(1) In general. - The amendments made by this section (amending
this section and sections 151, 6109, 6213, and 6724 of this title)
shall apply with respect to returns the due date for which (without
regard to extensions) is on or after the 30th day after the date of
the enactment of this Act (Aug. 20, 1996).
''(2) Special rule for 1995 and 1996. - In the case of returns
for taxable years beginning in 1995 or 1996, a taxpayer shall not
be required by the amendments made by this section to provide a
taxpayer identification number for a child who is born after
October 31, 1995, in the case of a taxable year beginning in 1995
or November 30, 1996, in the case of a taxable year beginning in
1996.''
EFFECTIVE DATE OF 1988 AMENDMENT
Section 703(d) of Pub. L. 100-485 provided that: ''The amendments
made by this section (amending this section and sections 129 and
6109 of this title) shall apply to taxable years beginning after
December 31, 1988.''
EFFECTIVE DATE OF 1987 AMENDMENT
Section 10101(b) of Pub. L. 100-203, as amended by Pub. L.
100-647, title II, Sec. 2004(a), Nov. 10, 1988, 102 Stat. 3598,
provided that:
''(1) In general. - The amendment made by subsection (a)
(amending this section) shall apply to expenses paid in taxable
years beginning after December 31, 1987.
''(2) Special rule for cafeteria plans. - For purposes of section
125 of the Internal Revenue Code of 1986, a plan shall not be
treated as failing to be a cafeteria plan solely because under the
plan a participant elected before January 1, 1988, to receive
reimbursement under the plan for dependent care assistance for
periods after December 31, 1987, and such assistance included
reimbursement for expenses at a camp where the dependent stays
overnight.''
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by Pub. L. 99-514 applicable to taxable years beginning
after Dec. 31, 1986, see section 151(a) of Pub. L. 99-514, set out
as a note under section 1 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by section 423(c)(4) of Pub. L. 98-369 applicable to
taxable years beginning after Dec. 31, 1984, see section 423(d) of
Pub. L. 98-369, set out as a note under section 2 of this title.
Section 475(a) of Pub. L. 98-369 provided that: ''The amendments
made by this title (probably means subtitle F (Sec. 471-475) of
title IV of Pub. L. 98-369, which enacted sections 25, 38, and 39
of this title, amended this section and sections 12, 15, 22 to 24,
27 to 35, 37, 39 to 41, 44A, 44C to 44H, 45 to 48, 51, 52, 55, 56,
86, 87, 103, 108, 129, 168, 196, 213, 280C, 381, 383, 401, 404,
409, 441, 527, 642, 691, 874, 882, 901, 904, 936, 1016, 1033, 1351,
1366, 1374, 1375, 1441, 1442, 1451, 3507, 6013, 6096, 6201, 6211,
6213, 6362, 6401, 6411, 6420, 6421, 6427, 6501, 6511, 7701, 7871,
9502, and 9503 of this title, repealed sections 38, 40, 44, 44B,
50A, 50B, and 53 of this title, and enacted provisions set out as
notes under sections 30, 33, 46, and 48 of this title) shall apply
to taxable years beginning after December 31, 1983, and to
carrybacks from such years.''
EFFECTIVE DATE OF 1983 AMENDMENT
Amendment by Pub. L. 98-21 applicable to taxable years beginning
after Dec. 31, 1983, except that if an individual's annuity
starting date was deferred under section 105(d)(6) of this title as
in effect on the day before Apr. 20, 1983, such deferral shall end
on the first day of such individual's first taxable year beginning
after Dec. 31, 1983, see section 122(d) of Pub. L. 98-21, set out
as a note under section 22 of this title.
EFFECTIVE DATE OF 1981 AMENDMENT
Section 124(f) of Pub. L. 97-34 provided that:
''(1) Except as provided in paragraph (2), the amendments made by
this section (amending this section and enacting section 129 of
this title) shall apply to taxable years beginning after December
31, 1981.
''(2) The amendments made by subsection (e)(2) (amending sections
3121, 3306, and 3401 of this title and section 409 of Title 42, The
Public Health and Welfare) shall apply to remuneration paid after
December 31, 1981.''
EFFECTIVE DATE OF 1978 AMENDMENT
Section 121(b) of Pub. L. 95-600 provided that: ''The amendment
made by subsection (a) (amending this section) shall apply to
taxable years beginning after December 31, 1978.''
EFFECTIVE DATE
Section applicable to taxable years beginning after Dec. 31,
1975, see section 508 of Pub. L. 94-455, set out as an Effective
Date of 1976 Amendment note under section 3 of this title.
PROGRAM TO INCREASE PUBLIC AWARENESS
Pub. L. 101-508, title XI, Sec. 11114, Nov. 5, 1990, 104 Stat.
1388-414, provided that: ''Not later than the first calendar year
following the date of the enactment of this subtitle (Nov. 5,
1990), the Secretary of the Treasury, or the Secretary's delegate,
shall establish a taxpayer awareness program to inform the
taxpaying public of the availability of the credit for dependent
care allowed under section 21 of the Internal Revenue Code of 1986
and the earned income credit and child health insurance under
section 32 of such Code. Such public awareness program shall be
designed to assure that individuals who may be eligible are
informed of the availability of such credit and filing procedures.
The Secretary shall use appropriate means of communication to carry
out the provisions of this section.''
References
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 23, 129, 213, 6213 of
this title; title 7 section 2015.
