Child and Dependent Care Credit in header of articles
Child and Dependent Care Credit in content page of articles
You might get back some of your childcare expenses by claiming this nonrefundable credit. If you cared for disabled dependents or spouses, you also might qualify to claim this credit.
To claim the child and dependent care credit, you must meet these requirements:
You and your spouse usually must file a joint return. See Filing Exceptions below.
You must provide the care so you (and your spouse, if married) can work or look for work.
You must have some earned income. If you're married and living together, both you and your spouse must have earned income. However, 1 spouse might be disabled or a full-time student at least 5 months of the year. If that's the case, the IRS assigns 1 of these earned income amounts to that spouse:
$250 per month for 1 child
$500 per month for 2 or more children
You and the person(s) being cared for must live in the same home for more than half of the year.
The person providing the care can't be:
Parent of your qualifying child under age 13
Person you can claim as a dependent
If your child provides the care, he or she:
Must be age 19 or older by the end of 2012
Can’t be your dependent
If you’re not filing a joint return, you and your spouse might be able to claim the credit. You must meet both of these requirements:
You paid more than half the cost of maintaining a household for the year. Both you and the qualifying person must have used the home as your main residence for more than half the tax year.
Your spouse wasn't a member of the household during the last 6 months of the tax year.
To claim a credit for qualified expenses, you must provide care for 1 or more qualifying persons. (See Qualified Expenses below.) Qualifying persons include:
Dependent who’s a qualifying child and under age 13 when you provide the care. Usually, you must be able to claim the child as a dependent to receive a credit. However, an exception applies for children of divorced or separated parents. In those situations, the child is the qualifying child of the custodial parent for purposes of this credit. This applies even if the noncustodial parent claims the child as a dependent.
Spouse or dependent of any age who’s both of these:
Physically or mentally incapable of self-care
Has the same main home as you do when you provide the care
Qualified child- or dependent-care expenses are those incurred while you work or look for work. The main purpose of the expenses must be for the well-being and protection of a qualifying person.
Qualified expenses include:
Expenses for care provided outside the home if the qualifying person regularly spends at least 8 hours each day in your home
If the qualifying person receives the care in a dependent-care center, the center must comply with all relevant state and local laws. A dependent-care center is one that cares for more than 6 people for a fee.
Expenses for in-home care. This includes expenses for:
Light housework related to the qualifying individual’s care
The care itself
Expenses for chauffeur or gardening services don't qualify.
Gross wages paid for qualified services, plus your portion of:
Federal unemployment taxes
Other payroll taxes paid on the wages
Meals and lodging for the employee providing the services
These expenses don't qualify for the child and dependent care credit:
Transportation costs to and from the childcare facility
Overnight camp expenses
Expenses for the education of a child in kindergarten or higher
However, the cost of before- or after-school programs might qualify if the program is essentially for the care of the child. Education costs below kindergarten level, including nursery school, qualify only if you can’t separate those costs from the cost of care.
Calculating the Credit
The credit is equal to 25% to 35% of qualified expenses. The percentage you can deduct depends on your adjusted gross income (AGI). The maximum amount of qualified expenses allowed to calculate the credit is:
$3,000 for 1 qualifying person
$6,000 for 2 or more qualifying persons
Complete IRS Form 2441 and attach it to IRS Form 1040 to claim the credit.
Some employers provide such childcare benefits as:
On-site care for their employees' children
Direct payment for third-party care
Accounts earmarked for childcare expenses. Employees can put money from their salaries into these accounts.
If the value of the benefit amounts is more than $5,000 , your employer will report the amount more than $5,000 as taxable income. If the value is less than $5,000 , your employer won’t report any amount as taxable income.
Section 125 plans are salary-reduction arrangements some employers offer. These plans are also called cafeteria plans or flexible spending accounts. They allow employees to reduce their salaries by a certain amount in return for 1 or more nontaxable benefit. You can use common flexible spending accounts to pay childcare or medical expenses.
Form W-2, box 10 will show the amount of child and dependent care benefits your employer provided. You can’t use expenses paid or reimbursed with these benefits to claim the childcare credit. Subtract the box 10 amount from the amount of the child and dependent care credit you can claim. When your W-2 form shows dependent-care benefits, you must complete Part III of Form 2441 (Form 1040) — even if you're not claiming a childcare credit.
Ex: Marge has 2 qualifying children and can claim $6,000 of qualifying expenses for the child and dependent care credits. However, Marge receives benefits of $3,000 from her employer. The employer reports the benefits in Form W-2, box 10. So, Marge must subtract her $3,000 in employer benefits from the $6,000 of qualifying expenses for the child and dependent care credit. She can only claim a $3,000 of qualifying expenses for the child and dependent care credit.
To learn more, see IRS Publication 503: Child and Dependent Care Expenses.