Under IRS Code §129, employers can exclude up to $7,500 ($5,000 before 2026) from an employee's wages for a dependent care assistance program. This amount can include the fair market value of care in a day care facility provided or sponsored by the employer or amounts withheld through a §125 cafeteria plan and paid directly to the provider.
The entire amount paid or incurred by the employer will be reported in Form W-2 Box 10, Dependent care benefits. The wages reported in Box 1, 3 and 5 will be reduced by the excludable amount.
When an amount is entered in Box 10, TaxSlayer Pro will automatically create Form 2441, Child and Dependent Care Expenses, entering the amount in Part III of the form. Form 2441 is used to reconcile the excluded employer benefits with the allowable deduction and determine if the taxpayer is eligible for any additional child and dependent care credit.
To exclude the Dependent Care Benefit from income, Form 2441 needs to be completed. The amount entered in Box 10 of the W-2 will flow to Form 1040 line 1e and will adjust based on the information entered in Form 2441.
To complete Form 2441 in the individual income tax return in TaxSlayer Pro, from the Main Menu of the return select:
- Credits
- Child and Dependent Care Credit (Form 2441)
Complete the following sections to correctly calculate the nontaxable portion of the Dependent Care Benefits.
- Amount Paid to Child Care Providers
- Number of Qualifying Persons
- 20xx Qualified Expense You Incurred/Paid
If the dependent care benefits listed in Box 10 of the W-2 were more than the amount excluded from wages in Box 1, then select
- Employer-paid Dependent Care Benefits
- Adjust Amount Pulled from W-2s - Enter the adjustment.
The employer is required to include the total amount of dependent care assistance in Box 10, but the amount that can be excluded from wages and taxable income is limited by the employer plan and IRS code. Form 2441 only includes the amount from Box 10 that was excluded from wages in the calculations. This information should be provided by the taxpayer or available on the paystub.
TaxSlayer Pro strives to make the information on this page timely and accurate but makes no promise or guarantee about the timeliness, accuracy, or completeness of the contents of this page. This is general information and is not intended to be tax advice. You are encouraged to also review the underlying federal resources and publications.
Additional Information:
Desktop: Child And Dependent Care Expense Credit
Form 1040 - Why is DCB Printing on Line 1?
IRS Publication 17, Your Federal Income Tax
IRS Publication 503, Child and Dependent Care Expenses
IRS Tax Topic 602, Child and Dependent Care Credit