Are you a working parent? Do you have Day Care Expenses? Did you know that you can deduct your child and dependent care expenses? The Child and Dependent Care Expenses Credit is a nonrefundable credit and will reduce the amount you owe on your taxes.
About Dependent Care Expense Credit
The dependent care credit was extended permanently by the year end 2012 Tax Act. To apply for this credit, working parents will use Form 2441 called Child and Dependent Care Expenses
As with all credits there are limitations and rules on who can qualify and what amount you can deduct for the Child and Dependent Care Expenses.
Here are some useful guidelines:
* Maximum amount you can receive is $3,000 for one child and $6000 for more than one child. (Note: the total limit of $6000 does not have to be divided equally between all the children.)
*To qualify for the credit you must have at least one child who is under the age of 13 and you must be claiming that child as a dependent. The dependent must have lived with you for a whole year.
Also, if you have a disabled spouse or a disabled person who is not able to care for themselves, you can claim them as a dependent, unless that person had gross income of $3,700 or more. They also must have lived with you for that year.
Six Rules that apply when taking the Child and Dependent Care Credit
• Filing status must be single, Head of House Hold, Qualifying Widow(er) or Married Filing Jointly.
• The care was provided so that the taxpayer (and spouse) could work or look for work.
• The taxpayer paid over ½ the cost of maintain a home.
• The taxpayer and the qualifying person lived in the same home.
• The person who provided the care was not the spouse or a person whom can be claimed as a dependent.
• If the taxpayer’s child provided the care, he or she must have been age 19 or older by the end of the year.
• You report the required information on Form 2441 called the Child and Dependent Care Expenses Form about the care provider on line 1 (SSN, EIN or Tax Exempt) and if taking the credit, the information about the qualifying person (Name and SSN) on line 2.
Tax Tips You May Not Know About the Child and Dependent Care Credit
• If your Spouse was going to school and is enrolled as a full-time student at a school during any 5 months of the year and you had to enroll your children in Day Care you will be eligible for the credit.
• Care includes the cost of services for the qualifying person’s wellbeing and protection. It does not include the cost of clothing or entertainment.
• Specialty day camps such as soccer, computers, etc., are qualified costs, unless for overnight stays.
• If you had qualified expenses from last year that were paid in 2013, the credit for the year may be increased.
• Some employers provide a cafeteria plan for dependent care benefits. So, if you signed up for this through your employer you will have to reduce the expenses that qualified for the credit. You can fine that amount on box 10 of your W-2. The good news is that 1040Return will do these calculations for you.
So, the good news is, when you use 1040Return to prepare your taxes, you can be assured that we will calculate the correct amount to maximize the Child and Dependent Care Expenses.