For many working parents, paying for childcare is simply a fact of life. But did you know that your care expenses could qualify for a federal tax credit that would lower your taxes? Here are 10 facts every working parent should know about the Child and Dependent Care Credit:
1. Your child(ren) must be under age 13.
2. If you are married, you have to file a joint return to take the credit. However, this rule does not apply if you’re legally separated or if you and your spouse live apart.
3. To qualify for the credit, both you and your spouse have to be working, looking for work or enrolled in school full time.
4. You must also have earned income for the tax year. This can include wages, salaries, tips, and net earnings if you are self-employed.
5. The type of paid care that qualifies for the credit includes day camp, daycare, or in-home care provided by a babysitter.
6. You can use up to $3,000 in unreimbursed childcare expenses for one person or $6,000 for two or more.
7. The credit depends on your income and can be as much as 35% of your allowable expenses.
8. Overnight camp, tutoring, or child care provided by someone you claim as a dependent do not count toward the credit.
9. You’ll need to report the name, address, and SSN or EIN of the care provider on your return, so be sure to keep good records and hang on to your receipts.
10. This credit is not just a summer tax benefit! It applies to care provided at any point throughout the year.
(Post updated 7/23/2018)