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Child and Dependent Care Tax Credit

TaxBizPro, LLC Posted on: March 24, 2010 10:24

Have you spent money to care for your child(ren), or a dependent, or perhaps you are planning to do so this year?  If so, you should know that you might be able to qualify and receive a Child and Dependent Care Credit on your federal and state (not all states have this credit please check with your tax advisor/accountant) income tax returns.  Here are some important facts you need to know about the eligibility and requirements for this tax credit.

1.   The care must have been provided for qualifying persons. A qualifying person is your dependent child age 12 or younger when the care was provided.  Also your spouse and certain other individuals who are physically or mentally incapable of self-care may also be qualifying persons.
2.   The care must have been provided so you and your spouse if you are married filing jointly could work or look for work.
3.   You and your spouse if you are married filing jointly must have earned income from wages, salaries, tips, or net earnings from self-employment or be a full-time student.
4.   The payments for care can only be paid to individuals who are not your spouse or a dependent on your income tax return.  You must identify the care provider(s) on your tax return and indicate the tax id or a social security number, address, and amount paid.  Have the care provider fill out form W-10* and you should keep this form in your records.
5.  Your filing status must be single, married filing jointly, head of household or qualifying widow(er) with a dependent child.
6.  The qualifying person must have lived with you for more than half of the year.  However, there are several exceptions to this rule; if the child was born later in the year or the child has passed away in the beginning of the year, see pub 503* for more details.
7.   For 2009, you may use up to $3,000 of expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit.
8.   The qualifying care expenses are reduced if you are participating in a dependent care FSA plan through your employer.  You can put aside up to $5,000 a year and this amount is reported on your form W2 line 10.
9.   If you pay someone to come to your home and care for your dependent or spouse, you may be a household employer.  If you are a household employer, you may have to withhold and pay social security and Medicare tax and pay federal unemployment tax.
*Links for more details:
Posted in:Personal Tax ArticlesThis article was written by TaxBizPro, LLC 2023, all rights reserved ©.  

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