Child and Dependent Care Expense Tax Credit

Did you pay someone to care for your child, spouse, or dependent last year? If so, you may be eligible for the Child and Dependent Care Expense tax credit. Below are a few things you need to know:

• The care must have been provided to a qualifying person, which is defined as:
  • Your child, age 12 or younger (that is claimed as a dependent)
  • Your spouse, who is physically or mentally ill
  • Certain other individuals who are physically or mentally ill (ie: a dependent parent)The people you claim for this credit must be named on your tax return.
• The care must have been provided so you could go to work or look for work. If you are married filing jointly, your spouse must have gone to work or looked for work, as well.
• You must have earned income. This may be from your salary, tips, wages, earnings from self-employment, or other taxable employee compensation. If you are married filing jointly, one spouse may be considered to have earned income if they were a full-time student or were physically and/or mentally unable to work.
• The payments for care may not have been paid to the following:
  • Your spouse
  • The parent of your qualifying person
  • To a person you claim as your dependent (ie your teenage son/daughter who cared for your younger child)
  • To your child if they will not be 19 years old by the end of 2012 (provided they’re not claimed as a dependent)
• The person you claim for the credit must have lived with you for over half the year; except for those individuals who died, were born, or children of divorced (or separated) parents.
• The credit may be up to 35% of your qualifying expenses, depending on your gross adjusted income.
  • You may claim up to $3,000 of expenses paid for one qualifying person or $6,000 for two or more, less any dependent care benefits provided by your employer.
• Those individuals filing as married filing separately do not qualify for this credit.

 

Also, keep in mind that if a care provider was paid to work in your home, you may need to pay Social Security and Medicare tax, as well as, federal unemployment tax.