Credit for Child and Dependent Care Expenses
If you are a qualifying individual working or looking for work and have child and dependent care expenses, you may qualify for a credit for child and dependent care expenses. The new tax law didn’t change this credit.
You may be able to claim the child and dependent care credit if you paid expenses for the care of a qualifying individual to enable you (and your spouse, if filing a joint tax return) to work or actively look for work.
You may not take this credit if your filing status is married filing separately.
The total expenses that you may use to calculate the credit may not be more than $3,000 (for one qualifying individual) or $6,000 (for two or more qualifying individuals).
Expenses paid for the care of a qualifying individual are eligible expenses if the primary reason for paying the expense is to assure the individual’s well-being and protection.
If you received dependent care benefits that you exclude or deduct from your income, you must subtract the amount of those benefits from the dollar limit that applies to you.
The amount of the credit is a percentage of the amount of work-related expenses you paid to a care provider for the care of a qualifying individual.
The percentage depends on your adjusted gross income (AGI). Your AGI is your gross income less certain adjustments to your income and can be found on your tax return.
For more information on the requirements for and calculation of this credit see IRS Publication 503, Child and Dependent Care Expenses.
The new tax law didn’t change this credit.
How will this affect me?
Matthew and Avery are married, file a joint tax return, and have a three-year old daughter. To enable Avery to begin a new job on July 1st, they enrolled their daughter in a nursery school that provides preschool childcare. They paid $300 per month for the childcare. Matthew and Avery can use the full $1,800 they paid ($300 × six months) as qualified expenses because it is less than the $3,000 yearly limit. They calculate the amount of the credit by applying the applicable percentage based on their AGI.
Matthew and Avery are married, file a joint tax return, and have a three-year old daughter. To enable Avery to begin a new job on July 1st, they enrolled their daughter in a nursery school that provides preschool childcare. They paid $300 per month for the childcare. Matthew and Avery can use the full $1,800 they paid ($300 × six months) as qualified expenses because it is less than the $3,000 yearly limit. They calculate the amount of the credit by applying the applicable percentage based on their AGI.