Ten Points to Know About Child And Dependent Care
Child and Dependent Care
If a TP paid someone to care for their child, spouse, or dependent last year, the TP may be able to claim the Child and Dependent Care Credit on the Federal Income Tax Return.
Below are 10 points the IRS wants you to know about claiming a credit for child and dependent care expenses:
1. The care must have been provided for one or more qualifying persons. A qualifying person is a dependent child age 12 or younger when the care was provided. Additionally, TP’s spouse and certain other individuals who are physically or mentally incapable of self-care may also be qualifying persons. Each must be identified as a qualifying person on the TP’s tax return.
2. The care must have been provided so the TP, and their spouse if married filing jointly, could work or look for work.
3. The TP, and spouse if filing jointly, must have earned income from wages, salaries, tips, other taxable employee compensation or net earnings from self-employment. One spouse may be considered as having earned income if they were a full-time student or were physically or mentally unable to care for themselves.
4. The payments for care cannot be paid to a spouse, to the parent of qualifying person, to someone that can be claimed as a dependent on the TP’s return, or to a child who will not be age 19 or older by the end of the year even if he or she is not the TP’s dependent. The TP must identify the care provider(s) on their tax return.
5. The filing status must be single, married filing jointly, head of household or qualifying widow(er) with a dependent child.
6. The qualifying person must have lived with the TP for more than half of the year. There are exceptions for the birth or death of a qualifying person, or a child of divorced or separated parents. See Publication 503, Child and Dependent Care Expenses.
7. The credit can be up to 35 percent of your qualifying expenses, depending upon your Adjusted Gross Income.
8. The TP may use up to $3,000 of expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit.
9. The qualifying expenses must be reduced by the amount of any dependent care benefits provided by employer that is deducted or excluded from income.
10. If the TP pays someone to come to their home and care for their dependent or spouse, the TP may be a household employer and may have to withhold and pay social security and Medicare tax as well as pay federal unemployment tax. See Publication 926, Household Employer’s Tax Guide.
Download free publications from https://www.irs.gov or order them by calling 800-TAX-FORM (800-829-3676).
Links:
Form W-10, Dependent Care Provider’s Identification and Certification (PDF 31K)
Form 2441, Child and Dependent Care Expenses (PDF)
Form 2441 Instructions (PDF 32K)
Publication 17, Your Federal Income Tax (PDF 2,075K)
Tax Topic 602