The Child and Dependent Care Tax Credit is designed to help hard-working parents and guardians to work and look for work as they care for a child or dependent. It also covers those who are caring for disabled children and adults.
Table of Contents
- 1 How Much Will I Get Back for Childcare Tax Credit?
- 2 Which Conditions Do Taxpayers Need to Meet to Claim This Tax Credit?
- 3 Who Qualifies as a Dependent for this Tax Credit?
- 4 How Can I Claim the Childcare Tax Credit?
- 5 What if Someone Claimed My Dependent?
- 6 How to File Taxes Online in 3 Simple Steps - TurboTax Tax Tip Video
How Much Will I Get Back for Childcare Tax Credit?
Depending on several factors, the childcare tax credit can be worth anything from 20% to 35% of your total care expenses.
Your income is the primary factor in deciding how much of your care expenses you can claim back. For example, to qualify for the full 35%, your income must be below $15,000.
The percentage you can claim back continues to decline by 1% for every additional $2,000 earned above the initial $15,000 limit. This will reach a maximum of $20,000. A taxpayer earning $43,000 or more will only receive 20% back through this tax credit.
The maximum you can claim is $3,000 in care expenses for one qualifying dependent and $6,000 for two qualifying dependents.
In total, the maximum this credit can be worth is $2,100, which is based on two or more children and $6,000 in expenses for the year.
However, keep in mind, the qualifying expenses included will be reduced by any other benefits you receive from your employer. This is also a non-refundable tax credit.
The Childcare tax credit can be calculated with the free child tax credits calculator.
Which Conditions Do Taxpayers Need to Meet to Claim This Tax Credit?
The first condition of claiming the childcare tax credit is you must have a form of earned income, such as a salary from your job. If you’re married and filing jointly, your spouse must also have a form of earned income.
This credit is available to all filing statuses, apart from married and filing separately. Although those who are married must have both parties earning an income, this requirement is waived if you’re disabled or are currently a full-time student.
The credit is designed to pay for the care of a qualified dependent. So, you must have paid for these services. However, the person providing the care cannot be a parent or spouse of the qualifying dependent. Furthermore, the caregiver cannot be under the age of 19.
The purpose of the care must be so you and your spouse can work, find work, further your education full time, or if you happen to be disabled.
Summer camps also count as a form of care. However, overnight camps don’t.
Who Qualifies as a Dependent for this Tax Credit?
Any child under the age of 13 will automatically qualify for the purposes of the childcare tax credit. For those over the age of 13, they only qualify if they’re permanently and totally disabled mentally or physically.
Any qualifying dependent must have lived within your household for at least half of the year. There are certain exceptions to this, such as if the child’s parents are divorced or separated. It also covers if a child was born during the tax year or died during the tax year.
How Can I Claim the Childcare Tax Credit?
You’ll need to fill out Form 2441 in order to claim this tax credit. You must provide the Social Security Number (SSN) of the qualifying person. You’ll also need to include some personal information from the caregiver you paid, including their taxpayer identification number.
This can be made easier by using online tax preparation software to both calculate and claim this tax credit.
What if Someone Claimed My Dependent?
A qualifying dependent may only be claimed on one tax return. The IRS has tiebreaker rules when a qualifying dependent is claimed on more than one tax return. This usually happens when two divorced parents are attempting to claim the same child as a dependent.