Are you a working parent trying to balance the cost of childcare with your income? The Child and Dependent Care Tax Credit may be able to help. The credit is designed to offset the cost of childcare for working parents, but not everyone qualifies.
How Do You Know If You’re Eligible?
To qualify for the credit, you must have earned income from a job or self-employment. You also must have paid for the care of a qualifying individual, such as a child under the age of 13 or a dependent adult, so that you could work or look for work. The credit is worth up to 35% of qualifying expenses, with a maximum credit of $3,000 for one qualifying individual or $6,000 for two or more. The percentage used to calculate the credit decreases as income increases. Some employer’s offer dependent care assistance programs as a fringe benefit, which gets reported on your W-2 and can result in tax free income.
Here’s a list of dependent care expenses that do and don’t qualify:
○ Nursery school
○ Day Camp, maybe
○ After School care
○ Paying grandparents
○ Overnight camp
○ Summer school/tutoring
○ Private schools
○ Paying a relative
Remember, you will need to file Form 2441 with your tax return and provide documentation of the expenses paid for the care, such as receipts or canceled checks.You don’t want to miss out on this valuable credit, it can give you the relief you need on your taxes.
It’s always best to consult with a tax professional or the IRS for more detailed information about the Child and Dependent Care Tax Credit and how it may apply to your specific situation. Reach out today if you have any questions!