This year, Taxpayers can claim a credit for Child and Dependent Care. This includes babysitters, day care centers, and summer day camps. I wrote a brief report on what qualifies as Child Care, but you know the IRS won't make it that easy! Now you need to know if you qualify to claim the credit, and how to claim it.
Tests to Claim the Credit
Before you file, make sure you met the following criteria.
1. You must Earn Income: You, and your spouse if he/she is working, must have earned income during the year. There's an exception, though. This rule doesn't apply for the care of a student-spouse or a spouse that in unable to care for themselves.
2. For Work Only: The IRS won't let you have a discount babysitter on their behalf so you can ditch the kids and hit the bar! The Child Care expenses must have been paid so you and your spouse can work OR look for work. No exceptions.
3. Qualifying Person: The care must be for a Qualifying Person, who is identified on the form you claim the credit on. Identifying a Qualifying person can be a little tricky:
a.) Qualifying Child- Your child, who is your dependent and who was under age 13 when the care was provided.
b.) Qualifying Spouse- Your spouse who was not physical or mentally able to care for themselves. They must live with you for more than half the year as your dependent.
This all gets more complicated when it comes to children with divorced or separated parents. I recommend reading Publication 503, Child and Dependent Care Expenses, for details if you need them.
4. Know who counts: Don't pay your teenager to watch the young kids, it doesn't count. You must make payment for child and/or dependent care to someone you and your spouse CANNOT claim as a dependent. If you make payments to your child, they must be 19 or older by the end of the year. Additionally, you can't make payments to:
a.) Your spouse
b.) The parent of your qualifying person if your qualifying person is your child and under age 13.
5. Joint Returns. Generally, married couples must file a joint return to claim the Childcare Credit. You must be, and file, as one of the following:
-head of household
-qualifying widow(er) with dependent child, or
-married filing jointly
You might want to take a peek at the following IRS Publications, Access them at IRS.gov.
- Publication 503, Child and Dependent Care Expenses
- Publication 501, Exemptions, Standard Deduction, and Filing Information
- Publication 926, Household Employer's Tax Guide
Forms (with Instructions)
- 2441 Child and Dependent Care Expenses
- Schedule 2 (Form 1040A) Child and Dependent Care Expenses for Form 1040A Filers
- Schedule H (Form 1040) Household Employment Taxes
- W-10 Dependent Care Provider's Identification and Certification
Qualify? In order to claim the Credit for Child and Dependent Care Expenses, file Form 1040, or Form 1040A. Do not file Form 1040EZ.
Labels: Children and Tax Debt