What Is Child and Dependent Care Credit?

Child Care Credit

If you pay for childcare or day camps in the summer while you work, your expenses may qualify for a Child and Dependent Care Credit that can lower your taxes. Here are 10 facts that you should know about this credit:

1. Your expenses must be for the care of either one or more qualifying persons. Your dependent child or children must be under the age of 13 to be able to qualify for this credit.  However, there is no age requirement if the dependent is physically or mentally incapable of self-care.

   

   Dependent Care Credit

2. Your expenses for care must be work-related. This means that you must pay for the care of your dependent so that you can work or look for work. This rule also applies to your spouse if you file a joint return.
3. You must have earned income, such as income you earned from wages, salaries and tips. Earned income also includes net earnings from self-employment. Your spouse must also have earned income if you file jointly. Your spouse is treated as having earned income for any month of the year that he or she is a full-time. This rule also applies to you if you file a joint return.
4. If you’re married you must file a joint return to take the credit.  However, this rule doesn’t apply if you’re legally separated or if you and your spouse live apart.
5. You may qualify for this credit regardless of whether you pay for care at home, at a daycare facility or at a day camp.
6. This credit is a percentage of the qualified expenses you pay during the year. It can be as much as 35% of your total expenses depending on your household income.
7. There is a limit on the total expenses that you can use for this credit in a year. The limit is $3,000 for one qualifying person or $6,000 for two or more.
8. The expenses of overnight camp or summer school tutoring do not qualify.  The cost of care provided by your spouse or your child who is under age 19 at the end of the year do not count. The cost of care from a person you claim as your dependent also do not qualify.

   

   Qualified Child-Care Providers

9. Be sure to keep all your receipts as well as to note the name, address and Social Security number or employer identification number of each care provider that you use. You must report all of this information on your tax return when you claim the credit.
10. The last thing to remember is that this credit is not just a tax benefit for summer. You may be able to claim this tax credit for care you pay for throughout the year if you qualify.

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Source: www.irs.gov.
Email: Excellent-tax@gmx.com