The Child and Dependent Care Credit
Editor’s Note: Kids, as much as you love them, are expensive little creatures! Fortunately, the tax code has some nice credits you can take advantage of. However, you must be careful in your calculators. The Tax Institute breaks down one common scenario.
I will pay $12,000 in day care expenses this year. I also will contribute $5,000 to my employer’s dependent care benefit plan. So the question is, can the remaining $7,000 be used for the child and dependent care credit?
Not quite! The maximum expense that can be used to calculate the child and dependent care credit is $3,000 for one child or $6,000 for two or more children, reduced by any excluded dependent care benefit (DCB) received.
If the $12,000 expense was for the care of at least two dependents, then only $1,000 of the remaining expense ($6,000 maximum expense vs. $5,000 DCB) may be used to calculate the credit. The resulting credit will be from $200 to $350 based on the percentage (20% to 35%) that applies to your income level.
If the $12,000 expense was for the care of only one child, then no additional tax benefit beyond the DCB is available. That is because the $5,000 DCB is more than the $3,000 maximum expense that can be used to calculate the credit for one child.
Also, we’re assuming that all expenses are qualified expenses and that there are no earned income limitations on you or your spouse.
Many are surprised to learn that even side gigs come with a tax price. H&R Block Tax pro's have arranged expert tips for those who owe direct sales taxes.
Are political contributions tax deductible? Before signing a check, learn the difference between charitable giving and political donations at H&R Block.
Trying to determine the cost of tax preparation or H&R Block’s prices? Find out why there is no one-size-fits-all answer when it comes to tax prep.
Here are the top tax questions our professionals got this year – with answers for you! How can you use this? Read on to get answers from H&R Block.