Child Care Tax Information

Paying for childcare and dependent care can be very expensive. Fortunately, there is a tax credit to help defray the costs. If you had to pay someone to care for your child so you could work, look for work, go to school, or because of a disability, then the Child and Dependent Care Credit may be for you. If you pay for day care, preschool, or a nanny, it pays to learn about these tax breaks.

Do I qualify for the Child and Dependent Care Credit?

You will generally qualify for the Child and Dependent Care Credit if you meet all of the following conditions.

  1. You must have earned income (such as wages from a job). If you are married and filing a joint tax return, your spouse must also have earned income.
  2. Your filing status is Single, Married Filing Jointly, Head of Household, or Qualifying Widow(er) with a Dependent Child.
  3. You (and your spouse if Married Filing Jointly) earned income from employment or self-employment. You are exempt from this requirement if you were a full-time student or disabled.
  4.  You paid someone to provide care for a Qualifying Person, and the care provider was not someone you could claim as a dependent, the parent of your Qualifying Person, your spouse, or your child under the age of 19 (regardless of whether they are a dependent).
  5. You had to pay for child care so that you (and your spouse if Married Filing Jointly) could work, week employment, or attend school, or if you were disabled.

Who can be my Qualifying Person?

A Qualifying Person for the Child and Dependent Care Credit can be either of the following:

  1. Any child who is your dependent and was under age 13 when the care was provided, or 
  2. Your spouse or dependent age 13 or over, if physically or mentally incapable of caring for themselves.

In addition, the Qualifying Person must have lived with your for more than half the year.

How much is the Child and Dependent Care Credit worth?

  • The Child and Dependent Care Credit can be worth from 20% to 35% of some or all of the dependent care expenses you paid. The percentage you use depends on your income. If your income is below $15,000, you will qualify for the full 35%. The percentage falls by 1% for every additional $2,000 of income until it reaches 20% (for an income of $43,000 or more). 
  • The 20-35% is taken from up to $3,000 of expenses paid for one Qualifying Person, or from up to $6,000 of expenses paid for two or more Qualifying Persons. Therefore, the maximum Child and Dependent Care Credit is worth $2,100 (based on 2 or more dependents and $6,000 or more of qualifying expenses. 
  • Before calculating the credit, you must reduce your qualifying expenses by any amount of child or dependent care benefits that were provided by your employer and that you deducted or excluded from your income.
  • The Child and Dependent Care Credit is not refundable, so it is not worth anything if you owe no income tax.

How do I claim the Child and Dependent Care Credit?

You claim the Child and Dependent Care Credit by including Form 2441 Child and Dependent Care Expenses in your tax return.

IMPORTANT: The Child and Dependent Care Credit information provided herein is for general information purposes only and is not meant to take the place of professional tax advice. Consult your tax professional before making any decisions regarding the Child and Dependent Care Credit.

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