The $8,000 child tax credit that many parents may not know about

Most U.S. families with children are familiar with the federal Child Tax Credit, given that parents of more than 60 million kids received enhanced payments in 2021. But there's another tax benefit geared to parents that may be less well known than the CTC but that can be far more generous, providing up to $8,000 in tax credits this year. 

The Child and Dependent Care Credit was supercharged through the 2021 American Rescue Plan, with the pandemic aid bill boosting how much parents can claim on their tax returns for child care expenses as well as making it fully refundable. The latter is important because if the tax credit exceeds what you owe the IRS, you'll get the difference in your tax refund. 

The Child and Dependent Care Credit isn't new — it's been around since the 1970s, and was designed to help working parents offset the cost of daycare, after school programs and summer camps. But the credit hadn't kept up with the pace of child care costs, with the child advocacy group First Five Years Fund noting in 2018 that it only covered about 10% of the typical annual cost of care for two children in the U.S. at the time.