Raising children is a joy, but it can be expensive. Fortunately, the Child and Dependent Care Credit is designed to help offset some of those costs. This credit isn’t just for parents of young children—it may also apply if you’re a caregiver for other dependents, such as a disabled spouse or an elderly parent living with you.
What is the Child and Dependent Care Credit?
This tax benefit helps those who need to pay for care so they can work or look for work. It’s designed to ease the financial burden of childcare or dependent care for qualifying individuals.
Who Can Claim It?
To qualify for the credit, you need to meet a few key criteria:
Care for Qualifying Persons: This includes children under 13 or dependents of any age who are physically or mentally incapable of self-care.
Employment Status: You and your spouse (if filing jointly) must be working or actively seeking work. If your spouse is a full-time student or disabled, you may also qualify.
Filing Status: Most filing statuses are eligible, but Married Filing Separately is excluded.
Income: While there’s no income cap, the credit decreases as your income increases, ensuring it targets those who need it most.
What Expenses Qualify?
Eligible expenses include:
Daycare, preschool, before- and after-school care, and summer camps.
However, private school tuition, overnight camps, and care provided by a spouse or a child under 19 don’t qualify.
How Much Can You Claim?
You can claim up to:
$3,000 for one qualifying individual, or
$6,000 for two or more.
Depending on your income, you can receive 20% to 35% of these expenses back, with a maximum credit of $2,100. However, most people will qualify for a lower percentage based on their adjusted gross income.
How to Claim the Credit
You’ll need to file Form 2441 with your Form 1040 tax return. Make sure to gather details about your care provider, including their name, address, and taxpayer identification number (TIN).
Next Steps
If you think you might qualify or want to explore this credit further, feel free to reach out. We can review your expenses, ensure you’re maximizing eligible costs, and help you claim this valuable credit to reduce your tax bill.
