The rising cost of childcare is an issue that many working parents face. Knowing ways to help save on childcare can help relieve the burden of continuing to work when there are young children at home.
The first cost savings that will be addressed is the Child and Dependent Care Credit. This is credit for a percentage of work-related expenses paid to a qualified care provider for a qualifying individual.
Do I quality?
To qualify for the credit, one must meet the following criteria:
- You, and or your spouse, must have earned income
- You (and your spouse if filing jointly) must have paid child and dependent care costs so that you could work, seek employment, attend school, or if you were disabled.
Who is a qualifying individual?
- A child under 13 years of age
- A person who is physically or mentally incapable of caring for his or her hygiene or nutritional needs (criteria apply).
How much is the credit worth?
The credit ranges from 35% of qualifying expenses, if adjusted gross income (AGI) is less than $15,000, to 20% of qualifying expenses, if AGI is greater than $43,000. The maximum qualifying expenses is $3000 for one qualifying individual and $6000 for two or more qualifying individuals.
How do I claim the credit?
The credit can be claimed on Form 2441 with Form 1040 or 1040A. One cannot duplicate child/dependent care expenses under both the Child and Dependent Care Credit and under a Dependent Care Assistance Program (see next week’s blog post).
The credit is nonrefundable.
For more information on child care savings. Please contact Brenda Jacobs at (616) 608-8530 or firstname.lastname@example.org.