Quick Reference for Tax Professionals ? Child Care Tax Credit

Mar 19, 2015

Child care is not cheap whatsoever, and most pay additional costs for someone they like and trust instead of the cheapest – just like your professional tax software! Here are some tips to help see if your clients qualify for this deduction.

Child Dependent or Spouse – If you paid someone to care for your child, dependent or spouse last year you may qualify.

Work-Related Expense – Care must have been required so you could work or look for employment. If married, spouse must have been working or looking for employment as well, unless spouse is a full-time student or disabled.

Qualifying Person – Care must be for child under 13 years old, spouse, or dependent that lived with you for more than half the year and is not capable of taking care of oneself.

Earned Income – You and your spouse (if applicable) must have earned income for the year. If spouse is a student or disabled there are additional qualifications that must be met.

Credit Percentage/Expense Limits – Credit is between 20-35 percent of your allowable expenses, depending on your income. Allowable expenses are limited to $3,000 for the care of one person who qualifies, and $6,000 for the care of two or more.

Qualifying Person’s SSN – This must be included for each qualifying person to claim the credit.

Care Provider Information – Information needed to claim the credit includes care provider name, address and taxpayer identification number.

Note – Payments cannot be made to someone you or your spouse claim as a dependent. If payments are made to your child, they cannot be your dependent and must be at least 19 years old by the end of the year. Expenses to attend kindergarten or a higher grade are not expenses for care, however preschool is considered an expense for care.

For more information on any of these tips, please see Publication 503

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