If you paid someone to care for a person in
your household last year while you worked or looked for work, then you may be
able to take the Child and Dependent Care Tax
Credit and reduce the amount of tax owed.
Here are 12 facts you should know about this
important tax credit:
1.
Child,
Dependent or Spouse. You
may be able to claim the credit if you paid someone to care for your child,
dependent or spouse last year.
2.
Work-related
Expenses. Your
expenses for care must be work-related. This means that you must pay for the
care so you can work or look for work. This rule also applies to your spouse if
you file a joint return. Your spouse meets this rule during any month they are
a full-time student. They also meet it if they’re physically or mentally
incapable of self-care.
3.
Qualifying
Person. The
care must have been for “qualifying persons.” A qualifying person can be your
child under age 13. A qualifying person can also be your spouse or dependent
who lived with you for more than half the year and is physically or mentally
incapable of self-care.
4.
Earned
Income Required. You
must have earned income, such as from wages, salaries and tips. It also includes
net earnings from self-employment. Your spouse must also have earned income if
you file jointly. Your spouse is treated as having earned income for any month
that they are a full-time student or incapable of self-care. This rule also
applies to you if you file a joint return. Please call if you have any
questions about what qualifies as earned income.
5.
Credit
Percentage / Expense Limits.The credit is worth between 20 and 35 percent
of your allowable expenses. The percentage depends on the amount of your income.
Your allowable expenses are limited to $3,000 if you paid for the care of one
qualifying person. The limit is $6,000 if you paid for the care of two or more.
6.
Dependent
Care Benefits. If
your employer gives you dependent care benefits, special rules apply. For more
information about these rules, please call the office.
7.
Qualifying
Person’s SSN.You
must include the Social Security Number of each qualifying person to claim the
credit.
8.
Keep
Records and Receipts. Keep
all your receipts and records for when you file your tax return next year. You
will need the name, address and taxpayer identification number of the care
provider. You must report this information when you claim the credit.
9.
Form
2441. File
Form 2441, Child and Dependent Care Expenseswith your tax return to
claim the credit.
10.
Joint
Return if Married. Generally,
married couples must file a joint return. You can still take the credit,
however, if you are legally separated or living apart from your spouse.
11.
Don’t
overlook vacation and summer camps.Day camps are common during the summer months.
Many parents pay for day camps for their children during school vacations while
they work or look for work. If this applies to you, your costs may qualify for
a federal tax credit that can lower your taxes.
12.
Certain
Care Does Not Qualify.You
may not include the cost of certain types of care for the tax credit,
including:
We at Schaumburg CPA offer a complete range of
International Taxation, Tax and Consulting Services.
We are here not only to understand your needs but excelling on solutions to
satisfy your needs. We are staying on top of current law changes and developing
new relationships on a daily basis to serve your needs.
Manendra Kothari is qualified Chartered Accountant from India and qualified and
licensed CPA from US.
Overnight camps or summer school tutoring
costs.
Care provided by your spouse or your child who
is under age 19 at the end of the year.
Care given by a person you can claim as your
dependent.
Contact us
:-847.524.0001
Visit us :- http://schaumburgcpa.info