The Child and Dependent Care Tax Credit
What it is and how much you can get
• The Child and Dependent Care Credit can get you 20% to 35% of up to $3,000 of child care and similar costs for a child under 13, an incapacitated spouse or parent, or another dependent so that you can work (and up to $6,000 of expenses for two or more dependents).
• The percentage of allowable expenses decreases for higher-income earners — and therefore the value of the credit also decreases — but it never disappears completely.
• This credit is not refundable, which means it can reduce your tax bill to zero but you won’t get a refund on anything left over from the credit.
• Some states also offer their own versions of this credit for child care and dependent care. They are often simply a percentage of the federal credit, but your state could expand eligibility, adjust the income thresholds or provide other incentives.
How to qualify for the Child and Dependent Care Tax Credit
• A dependent child must be 12 or younger at the time the child care is provided.
• Spouses and other dependents don’t have an age requirement, but IRS rules say they must have been physically or mentally incapable of self-care and must have lived with you for more than half the year.
• If you’re married, you must file as married filing jointly.
• You must have earned income — money you earned from a job. Investment or dividend income doesn’t count.
• You must provide the care provider’s name, address and Taxpayer Identification Number — either a Social Security number or an Employer Identification Number.
You can’t claim the credit for payments to care providers who are:
• Your spouse
• A parent of the dependent child
• A dependent listed on your tax return
• Your child who is age 18 or younger, even if they’re not listed as a dependent on your return
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