The Child Care Credit is an important tax credit that can help to reduce your federal income taxes and shouldn’t be overlooked. The following requirements must be met in order to qualify for the credit:
1. You must be paying for child care so you and your spouse (if filing jointly) can either work or actively seek work. The credit applies to your spouse if they are a full-time student or are mentally or physically unable to care for themselves.
2. You must be bringing in earned income such as a salary or self-employment wages. If filing jointly, your spouse must also have earned income.
3. You must be paying for the care of at least one qualifying person which includes children under 13 who you claim as a dependent.
4. The care can include care in the home, in an outside daycare facility or a day camp. Be sure to determine if you are a household employer if the care is being provided in your home.
5. The credit is up to 35% of your expenses based on your income.
6. You can claim up to $3,000 of your unreimbursed expenses for a single qualifying individual and up to $6,000 for two or more.
7. Overnight camps and summer school tutoring do not qualify for this credit. Your spouse or someone you claim as a dependent cannot provide the care in order to qualify.
8. Keep the name, address and social security number or EIN of the individual or company providing the care. Keep all of your receipts to prove your expenses.
For more in-depth information about the Child Care Tax Credit, contact us and we can help you determine whether you qualify as well as the correct credit for your specific situation.