The IRS Child and Dependent Care Expense Credit can reduce your tax bill if you paid for a dependent's care so that you could work or go to school full-time.
The credit is as high as 35% of qualified expenses (for AGI under $15,000), down to 20% of qualified expenses (for AGI over $43,000). There is no minimum amount you have to spend to qualify.
The credit is based on up to $3,000 in qualified expenses per dependent – with a maximum of $6,000 for two or more dependents – as long as you (and your spouse, if you're filing jointly):
- Have earned income; and
- Paid someone else to care for a child under age 13 for at least part of the year, disabled spouse, or dependent; and
- Paid the expenses so you could work, look for work, or go to school full time.
Important: Don't confuse the Child and Dependent Care Expense Credit (which is reported on Form 2441) with the similar-sounding
Child Tax Credit (reported on Forms 1040/1040A and 8812).
You might be wondering...
Can I claim this credit if my spouse is unemployed?
To claim the credit (assuming you meet the qualifications) your non-disabled, unemployed spouse must:
- Have looked for work during the time the expenses were incurred; and
- Have earned income during the year. (Unemployment income is not considered earned income.)
If your unemployed spouse is disabled or a full-time student, the IRS treats them as though they have earned income, provided you are not disabled or going to school full time yourself.
Can I get this credit if I do not claim the child as a dependent?
Possibly. If you were the child's custodial parent (i.e., the parent with whom the child lived for the greater number of nights during the year) and the child was under the age of 13 for at least part of the year (or unable to physically or mentally care for themselves) you can qualify for the credit as long as the other conditions are met.
Conversely, noncustodial parents do not qualify for the credit even if they are able to claim the child as a dependent.
Does preschool tuition count?
Yes. Nursery school, preschool, and similar pre-kindergarten programs are considered child care by the IRS.
On the other hand, tuition for kindergarten and higher grades do not qualify as child care.
The cost of overnight summer camps does not qualify, but fees for summer day camps do.
What are some reasons I might not qualify?
This credit has many rules and exceptions. TurboTax handles those for you, and will inform you if you don't qualify and why. Here are several common reasons you might not qualify:
- You have no earned income and you are not looking for work, disabled, or a full-time student.
- Your spouse (if filing jointly) has no earned income and is not looking for work, disabled, or a full-time student.
- Note: A sole proprietorship or home business with no net income (or a loss) during the tax year is defined by the IRS as having no earned income and would therefore disqualify the business owner (or spouse, if filing jointly) from receiving this credit. Sad, but true.
- You have no tax liability to apply the credit towards.
- You're paying the child's parent for child care.
Those are some of the more common reasons for non-qualification, but there are others. For starters, we recommend that you check out the IRS's Top Ten Facts About the Child and Dependent Care Credit.
For complete information about this credit, refer to IRS Publication 503. (Page 4 contains an excellent flowchart to help you determine if you qualify.)
Where do I find the Child and Dependent Care Expense Credit in TurboTax?
To get to this topic:
- Click Federal Taxes (Personal tab in Home & Business) and then select Deductions & Credits right below it.
- Click the Explore on My Own link.
- Continue until you reach the Your Deductions and Credits screen.
- In the You and Your Family section, click Start or Update to the right of Child and Dependent Care and follow the on-screen instructions.
What do I enter in TurboTax if I used a cafeteria plan or flexible spending account to pay for care?
IMPORTANT: When TurboTax asks how much you paid for dependent care, please enter the TOTAL amount, including any expenses that were paid with funds from a flexible spending account or cafeteria plan.
TurboTax will reduce that total by the amount set aside in your spending account (reported on your W-2) and apply any balance toward the credit.
For example, if you spent $3,000 in total for dependent care and paid $1,000 of that with your flexible spending account, TurboTax will calculate the credit using the remaining $2,000.
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