 Most of this information comes from Publication 503 Child and Dependent Care Expenses Tax Year 2022. You can find it on the IRS website, irs.gov, irs.gov, looking at the income tax formula. We're down here on the credit area at the bottom of the formula. Remembering the first half of the income tax formula is in essence an income statement, although a strange one ending at taxable income. The equivalent of an income statement ending at net income, income minus expenses, income minus deductions. Then we're going to be calculating the tax on that taxable income, not using one rate, not a flat tax system, but using the progressive tax system to get to the tax before credits and other taxes, but we can't stop there. Then we have to think about those credits and other taxes like self-employment tax, and then we have to think about how much we paid in with estimated tax payments or withholdings to get to the bottom line, tax refund, or tax due. Also remember, credits and deductions are both good in that we like both of them. However, they're different in that if we had a dollar of credit versus a dollar deduction, we would typically rather have the credit because we get the full benefit of the dollar credit as opposed to a deduction. In a deduction, we would be reducing the taxable income and the benefit we would get would be dependent upon our tax rates. However, if we get the credit, we typically get the full credit. Also note that we have these two categories of credits, non-refundable credits, and refundable credits, and that's why we have these two kind of line items down here that have credits involved in them. The non-refundable credits don't take the tax liability below zero. The idea being that if you took the tax liability below zero, it wouldn't be a tax at that point in time because it would be more of a benefit type of program, a welfare type of program. But the refundable credits do take the liability below zero and is using the tax code in that kind of way, making it like a welfare or benefits type of program. Okay, that said, we want to go into what's new first and then we'll get into the nitty and the gritty with the expenses. First thing I just want to point out here is that the child and dependent care expenses credit is not the same as the child tax credit. We've talked about the child tax credit before, which is fairly straightforward because you have a qualifying child to see if you would qualify for the child tax credit. It's a little bit more complicated to think about the child and dependent care expenses credit because now you have expenses that are related to the care of the child and the credit is going to be based on those expenses. So the two different credits. All right, so what's new with it? So the 2021 enhancements to the credit for the child and dependent care expenses have expired. So this is kind of a common theme. You'll recall when the COVID thing happened, then a lot of the response to it was through the tax code where they sent out stimulus payments and all that kind of stuff. And they also inflated some of the credits, including the child tax credit and whatnot, as well as this child and dependent care expenses credit. And then in my opinion, it looks like they kind of overspent, which at least contributed to inflation, which I think in the long run will probably hurt more people than the short run cash flow helped. But that's just my opinion. But now, of course, they have to reel that back in so that they're tightening the belts here, which is they're tightening your belts, right? They're tightening our belts. So that's what we have here. And so the changes to the credit for the child and dependent care expenses for 2021 under the American Rescue Plan Act of 2021 have expired. For 2022, the credit for child and dependent care expenses is non refundable. So it doesn't go below the zero threshold as opposed to the child tax credit and the earned income tax credit, the big ones that have that refundable components. And you may claim the credit on qualifying employment related expenses up to $3,000. If you had one qualifying person or $6,000, if you had two or more qualifying persons, the maximum credit is 35% of your employment related expenses. The more you earn the lower the percent of employment related expenses that are considered in determining the credit. So you have that phase out kind of concept in place. So once your adjusted gross income is over $43,000, the maximum credit is 20% of your employment related expenses.