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In general, the child and dependent care credit is available if you:
- Had earned income,
- Paid for the care of a qualifying person while you were working, and
- Your filing status is single, married filing jointly, head of household, or qualifying widow(er) with a dependent child.
The credit is a percentage of the amount of work-related child and dependent care expenses you paid to a provider. The credit can be up to 35 percent of qualifying expenses for low income taxpayers (up to $15,000 in adjusted gross income). It decreases gradually to a minimum of 20 percent for taxpayers with an adjusted gross income of more than $43,000. Currently, you may use up to $3,000 of the expenses paid in a year for one qualifying individual, or $6,000 for two or more qualifying individuals. (These dollar limits are reduced for taxpayers who receive dependent care benefits from their employers that are excluded from income).
Here are some answers to frequently-asked questions about the credit:
Who is a qualifying person for purposes of the child and dependent care credit?
The person receiving care must fall into one of these categories:
- Your child, who was 13 or younger when the care expenses were incurred, and who lived with you for more than half of the year.
- Your spouse, who lived with you for more than half of the year and meets the incapacity test (is mentally or physically incapable of caring for him or herself).
- Your dependent who lived with you more than half of the year and meets the incapacity test.
- If the person receiving care lived with you for more than half the year and is incapable of caring for him or herself, he or she may still qualify under limited circumstances. See your tax professional to make this determination.
What if a taxpayer does not have a job but is looking for work?
You can claim a credit for child or dependent care expenses paid while you to look for work. However, you cannot take the credit if you do not find a job and have no earned income for the year.
If you are married, generally both you and your spouse must be working or looking for work during the time the expenses are incurred.
What if your mother-in-law lives with you and cares for your children? Can you take a credit based on the amounts you pay her, or another caregiver who is related to you?
If the caregiver is not your dependent, the answer is yes. It doesn't matter if the caregiver lives with you. But you cannot deduct amounts paid:
To your spouse.
To your child who is under age 19 at the end of the year if he or she lives with you -- even if the child is not your dependent.
A dependent for whom you or your spouse can claim an exemption.
Suppose the person you pay to provide care refuses to give you a Social Security or (in the case of an organization) employer identification number. Can you claim the credit?
Generally, you must include the name, address, and taxpayer ID number on your tax return, but there are exceptions.
If the organization providing care is one of certain tax-exempt organizations, such as a school or religious organization, you don't need a taxpayer ID. You can write "tax-exempt" in the space provided for the taxpayer ID number.
If the caregiver refuses to provide you with the taxpayer ID number or gives you incorrect information, you may be able to claim the credit if you exercised "due diligence" to try to obtain the information.
| If you have questions about the details of claiming the child and dependent care credit, contact Tax Specialist Crystal Martin at 717-757-6999 or 800-745-8233, or send her an email by using the form below. |
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
IRS Circular 230 Notice: To ensure compliance with requirements imposed by the IRS, we inform you that any US tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code.
Securities and advisory services offered through Geneos Wealth Management, Inc. Member FINRA/SIPC. Geneos Wealth Management, Inc is not affiliated with Stambaugh Ness. |
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