You may qualify for the Child Care Credit if you are employed and pay for childcare services where you work. There are certain requirements that you must meet in order to claim the credit on your federal tax return. Ask your tax adviser if you need help determining whether you qualify to claim the child care tax credit.
Which Types of Child Care Qualify?
Day care services are the most common types of child care that meets the criteria for the child care tax credit. While overnight camps do not qualify, day camp expenses are eligible. The child care services must be used so you can work or seek regular employment opportunities. Taxpayers can claim the credit whether they file single or jointly. If you are married and you claim the Child Care Tax Credit both you and your spouse must work, or be a full-time student.
Which Children Qualify?
Children who are your dependents and under age 13 who receive care from a qualified child care provider are eligible to have expenses considered under the Child Care Tax Credit. The age requirement is extended for children over the age of 12 who are physically or mentally incapable of self-care. The child must live in your residence for at least half of the year in order for their expenses to be eligible. Major life changes, such as birth, death, or divorce can alter the requirements.
Who is a Qualified Provider?
Certain providers, such as a nanny or babysitter, may provide child care in your home and still qualify. Your spouse does not qualify as a care provider in terms of the Child Tax Credit, nor does care services provided by another dependent child or a non-dependent under the age of 19.
What is the Maximum Credit?
If you pay for care for one child you can claim up to $3,000 of expenses, with the limit extended to $6,000 for two or more children. The credit is then assessed at 20 to 30% of your unreimbursed childcare expenses.
Which Form to File?
When filing your tax return, you must include Form 2441, Child and Dependent Care Expenses. You’ll be required to provide the child care servicer’s contact information, including name address and employer identification number.
