Tax Credits for Dependent Care Expenses

Child doing taxes

Did you know that federal tax law allows you to claim a credit when you pay someone to care for your kids while you’re at work? The child and dependent care credit is valuable because it reduces the amount of tax you owe dollar-for-dollar.

Here’s an overview of the rules:

  • The child care expenses must be work-related. This requirement means you have to pay for childcare so you can work or actively look for work. If you’re married, you and your spouse must both work. There are exceptions to this “earned income” rule for spouses who are full-time students or who are not able to care for themselves due to mental or physical limitations.
  • The expenses generally must be paid for care of your under-age-13 child. However, expenses you pay to care for a physically or mentally disabled spouse or adult dependent may also count.
  • The expenses must be paid to someone who is not your dependent. Amounts you pay your spouse, your child’s parent (such as an ex-spouse), anyone claimed as a dependent on your tax return, or your own child age 18 or younger, don’t qualify for the credit. For example, if you pay your 17-year-old dependent child to watch a younger sibling, that expense doesn’t count for purposes of claiming the credit.
  • The care provider has to be identified on your tax return. You’ll typically need to show the name, address, and taxpayer identification number. You can request this information by asking your provider to complete “Form W-10, Dependent Care Provider’s Identification and Certification.”
  • The amount you can claim depends on how much you spend for the care up to a dollar limit of $3,000 of expenses for one dependent and $6,000 for two or more dependents.

If you are unclear on which expenses you are able to claim, or if you have any other tax questions, call the offices of Mark J. Cisco & Co. at 419.629.3494.

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