Child and Dependent Care Credit
You might be able to get back some of the money you spent on childcare expenses by claiming this nonrefundable credit. You can also qualify if you cared for disabled dependents or spouses.
To claim the child and dependent care credit, all of these must be true:
- You and your spouse usually file as married filing jointly. (See Filing exceptions below.)
- You provide the care so you (and your spouse, if married) can work or look for work.
- You have some earned income. If you’re married and living together, both you and your spouse must have earned income. However, one spouse might be disabled or a full-time student at least five months of the year. If that’s the case, the IRS assigns one of these earned income amounts to that spouse:
- $250 per month for one child
- $500 per month for two or more children
- You and the person(s) being cared for live in the same home for more than half of the year.
- The person providing the care can’t be:
- Your spouse
- 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 2018
- Can’t be your dependent
Even if you’re not married filing jointly, you and your spouse might be able to claim the credit if both of these are true:
- 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 six months of the tax year.
To claim a credit for qualified expenses, you must provide care for one 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 you incur while you work or look for work. The main purpose of the expenses must be well-being and protection.
Qualified expenses include:
- Expenses for care provided outside the home. This applies if the qualifying person regularly spends at least eight 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 six 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
- Gross wages paid for qualified services, plus your portion of:
- Social Security
- 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
- Expenses for chauffeur or gardening services
The cost of before- or after-school programs might qualify if the program is for the care of the child. Education costs below kindergarten qualify if you can’t separate those costs from the cost of care. This includes nursery school.
Calculating the credit
The credit is 20%-35% of qualified expenses. The percentage depends on your adjusted gross income (AGI). The maximum amount of qualified expenses you’re allowed to calculate the credit is:
- $3,000 for one qualifying person
- $6,000 for two or more qualifying persons
Complete Form 2441: Child and Dependent Care Expenses and attach it to your Form 1040 to claim the credit.
Some employers provide childcare benefits like:
- 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 benefits is more than $5,000, your employer will report everything over $5,000 as taxable income. If the value is less than $5,000, it’s not taxable income.
Some employers offer Section 125 plans. These are also called cafeteria plans or flexible spending accounts (FSAs). They allow employees to reduce their salaries for one or more nontaxable benefits. You can use common flexible spending accounts to pay childcare or medical expenses.
Your 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 shows dependent care benefits, you must complete Form 2441 (Form 1040), Part III. This applies even if you’re not claiming a childcare credit.
To learn more, see Publication 503: Child and Dependent Care Expenses at www.irs.gov.
For individual taxpayers, Schedule A is used in conjunction with Form 1040 to report itemized deductions. If you choose to claim itemized deductions instead of the standard deduction, you would use Schedule A to list your deductions. Your itemized total is then subtracted from your taxable income.
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