Finding the right person or company to care for your child or disabled spouse is difficult, and paying for it can become very expensive.
Fortunately, you can get a break on these expenses by filing for the child and dependent care tax credit.
And depending on your income and how many people need care, you can get up to a $2,100 credit. Below is more information regarding the credit, including who qualifies as someone who needs care, what kind of expenses count, and who can claim the tax break.
Who Qualifies as a Person Who Needs Care?
In order to be eligible, the person who needed the care can fall into one of four categories:
- A qualifying child who was 12 years old or younger at the time that they received the care.
- Your spouse, who lived with you for at least half the year, and is not physically or mentally able to care for themselves.
- A dependent of yours, other than a child, who lived with you for at least half the year, and is physically or mentally unable to take care of themselves.
- Someone who is unable to care for themselves and lived with you for more than half the year, and otherwise would qualify to be your dependent, save for the fact that they had too much income, were someone else’s dependent, or filed a return as married filing jointly.
In general, you can claim the credit on expenses paid for someone who is your child (12 years old or younger) or otherwise dependent on you if they are 13 or older and were not able to care for themselves.
What Kind of Care Expenses Count Towards the Credit?
Amounts you pay for daycare, a nanny, boarding at your child’s school, after-school care, day camp, or a home aide can be counted as expenses. However, you are not permitted to claim any amounts towards the credit that you paid to someone who is your dependent, your spouse, the child’s other parent, or another of your children who is 18 or younger. You must also subtract any amount of money that you were given by your employer as a benefit from your total expenses.
You are permitted to claim up to $3,000 in expenses if you have one person who qualifies for care and up to $6,000 if you have two or more. However, these do not have to be split evenly. For example, if you have one infant and one eight-year-old child who both went to daycare, the infant’s care may cost more half of the $6,000, and you can still use all of those expenses towards your credit.
Who can Claim this Credit?
You may only claim this credit if you needed someone else to provide care for this person because you were working or looking for a job. If you file as single, head of household, or qualifying widower, you must have some earned income (wages, salary, tips, or self-employment income), have been a full time student, or were unable to care for yourself.
If you file as married filing jointly, you both must either have earned income or have been a student or unable to care for yourself. If one spouse had no earned income, wasn’t looking for work, wasn’t a student, and was able to care for themselves, you cannot claim the credit since it is assumed that that spouse should have been caring for the person instead of paying someone else to do so (e.g. stay at home mom). You cannot claim this credit if you file as married filing separately.
How Big of a Tax Credit can I Get?
You can receive up to 35% of your expenses, and the expenses that you can get that percentage on are capped at $3,000 for one qualifying person or $6,000 for two or more. The percentage goes down as your earned income goes up.
Also, you cannot claim expenses that exceed either your or your spouse’s earned income for the year (if one of you was a student or disabled, only the person who had earned income would count in this instance). For the purposes of the form, your earned income is the same as your adjusted gross income (line 38 on your 1040). If you are filing jointly, the AGI includes both of your incomes. The percentage goes down to 20%, but you can still claim at least 20% on $3,000 or $6,000 worth of expenses no matter how high your income is.
Below are the percentages of expenses that apply for the tax credit based on your earned income.
- $0 – $15,000 35%
- $15,000 – $17,000: 34%
- $17,000 – $19,000: 33%
- $19,000 – $21,000: 32%
- $21,000 – $23,000: 31%
- $23,000 – $25,000: 30%
- $25,000 – $27,000: 29%
- $27,000 – $29,000: 28%
- $29,000 – $31,000: 27%
- $31,000 – $33,000: 26%
- $33,000 – $35,000: 25%
- $35,000 – $37,000: 24%
- $37,000 – $39,000: 23%
- $39,000 – $41,000: 22%
- $41,000 – $43,000: 21%
- $43,000 – No Limit: 20%
How Do I Claim the Credit?
You will need to complete Form 2441. You must also use Form 1040 or 1040A – you can’t use form 1040EZ to take this credit. If you received any dependent care benefits from your employer, you will need to complete the entire form, including part 3 on the second page. If you did not receive any dependent care benefits you can just complete the first page with parts 1 and 2. You’ll need to provide the name, social security number or EIN, and address of anyone that you paid to provide care. Most nursery schools, daycares, or other childcare institutions will be able to provide you this information, as well as a total of what you’ve paid to them over the year. For more detailed instructions, such as how to complete the form if one spouse is a full time student, see the Form 2441 instructions.
Have you claimed the child and dependent care tax credit? Do you have any suggestions or tips on how to identify which circumstances qualify for this credit? Let us know in the comments section below.