Every year, millions of taxpayers take advantage of the Child and Dependent Care Expenses Tax Credit. If you paid someone to care for your child, spouse, or other dependent during the year (while you worked or searched for employment), you may qualify for this federal tax credit.
Requirements for the Child and Dependent Care Expenses Tax Credit
Before you claim this tax credit, you must determine if you are eligible for it. To qualify for the Child and Dependent Care Tax Credit, you must meet the following IRS requirements:
- The expenses that you paid must have been for the care of a qualifying dependent ― defined as a child (age 12 or younger) or other qualifying person who is incapable of self-care.
- The care must have been provided so that you (or your spouse) could work or search for employment. (This qualification rules out “stay-at-home moms.”)
- The qualifying dependent must not have provided more than half of their own support.
- The qualifying dependent must have lived with you for more than half of the tax year.
- You (or your spouse) must have earned income from wages, salaries, tips, other taxable employee compensation, or net earnings from self-employment.
- Your filing status cannot be “married filing separately.”
Based on your adjusted gross income (AGI), you may receive a tax credit that equals up to 35% of the qualifying expenses you paid. The maximum amount you can claim for the Child and Dependent Care Expenses Credit is $3,000 for one qualifying dependent, or $6,000 for two (or more) qualifying dependents.
NOTE: If your employer provided you with any dependent care benefits that you deduct or exclude from your income, your qualifying expenses for the Child and Dependent Care Credit will be reduced by the amount of those benefits.
How to Claim the Child and Dependent Care Expenses Tax Credit
If you are eligible for this tax credit, you must file the proper forms with the IRS. Form 2441 (Child and Dependent Care Expenses) must be filled out and attached to your Form 1040, Form 1040A, or Form 1040NR.
Form 2441 consists of three distinct parts:
Part I ― Persons or Organizations Who Provided the Care
You must identify the care providers and include information about them (e.g., name, address, ID number, and amount paid).
Part II ― Credit for Child and Dependent Care Expenses
You must identify the qualifying person(s) for whom you are paying care expenses. There is only space on the form for 2 qualifying individuals ― if you have more than 2, refer to the Form 2441 Instructions.
Part III ― Dependent Care Benefits
You must report the total amount of any dependent care benefits you received from your employer during the tax year. Then work your way down the page to calculate your tax credit.
As a parent, it is important to understand the various tax benefits that can come with having children. The Child and Dependent Care Expenses Tax Credit has helped many families save money on their taxes. While tax laws are constantly changing, keeping yourself informed is a critical part of successful financial planning.