Child/Dependent Care Expenses Credit

Taxpayers may claim a credit for expenses paid to a care provider for the care of a qualifying individual1. The credit is generally a percentage (dependent upon the taxpayer’s Adjusted Gross Income) of the amount of such expenses paid during the year. Work-related expenses qualifying for the credit are those paid for the protective care of a qualifying individual in an effort to enable the taxpayer to work or actively look for work.

Credit Amount: The amount of expenses qualifying for the credit are capped at $3,000 (for one qualifying individual) or at $6,000 (for two or more qualifying individuals). Furthermore, taxpayers must be sure to reduce the amount of qualifying expenses by any amount of dependent care benefits provided by the taxpayer’s employer.

Other Requirements:
-The care payment must be made directly to a care provider who is not (i) the taxpayer’s spouse, (ii) the parent of the qualifying child, (iii) another of the taxpayer’s children under age 19, or (iv) a dependent of the taxpayer or his/her spouse.
-If married, taxpayer must file a joint return.
-Taxpayer must provide the taxpayer identification number (usually the social security number) of each qualifying individual on the return on which the credit is claimed.
-Taxpayer must report the name, address, and taxpayer identification number (either the social security number, or the employer identification number) of the care provider on the return. If the care provider is a tax-exempt organization, only the name and address of the organization is required (use Form W-10 to request this information from the care provider).

To formally claim this credit, taxpayers must complete Form 2441 and attach it to their tax return. More information regarding this credit can be found at here.

1A qualifying individual means (1) the taxpayer’s qualifying child under age 13 (at the time of care) or (2) an individual who is physically or mentally incapable of self-care2 and regularly spends at least 8 hours each day (for more than half of the tax year) in the taxpayer’s household. For example, either a disabled spouse or a child that is not claimable as a dependent due to a divorce or separation may be considered a qualifying individual for the purposes of this credit.
2An individual is physically or mentally incapable of self-care if, as a result of a physical or mental defect, the individual is incapable of caring for his or her hygiene or nutritional needs, or requires the full-time attention of another person for the individual’s own safety or the safety of others.

Photo by: Quinn Dombrowski