Child and Dependent Care Credit: What it is and who qualifies?

If you’re a parent or caretaker of young children, disabled dependents, or a disabled  spouse, listen up — you may qualify for a special tax credit used for claiming childcare and dependent care expenses. It’s called the child and dependent care tax credit, and you might be able to get back some of the money you spent on these expenses by  claiming it. 

Currently, the child and dependent care credit ranges from 20% to 35% of qualified  expenses. The percentage depends on your adjusted gross income. The maximum  amount of qualified expenses for the credit is: 

• $3,000 for one qualifying person 

• $6,000 for two or more qualifying persons 

The credit percentage phases down depending on your AGI. We’ll discuss how to calculate the amount of the credit you may receive later on in this post. 

Requirements 

1. If you are married, you and your spouse usually file as married filing jointly. You may also claim the credit if your filing status is single, head of household, or  qualifying surviving spouse.

2. You pay for the care so you (and your spouse, if married) can work or look for  work. 

3. You have earned income. If you’re married and living together, both you and your  spouse must have earned income. However, if one spouse is disabled or a full-time student for at least five months during the year, the IRS assigns to that  spouse: The higher of $250 or actual income for the month for one qualifying  person, or the higher of $500 or actual income for the month for two or more  qualifying persons 

4. You and the person(s) being cared for live in the same household for more than  half of the year. 

5. The person providing the care can’t be: Your spouse, parent of your qualifying child; or person you can claim as a dependent 

6. If your child provides the care, they: Must be age 19 or older and can’t be your dependent.

Who qualifies 

To claim a child and dependent care credit for qualified expenses, you must pay for care for one or more qualifying people.

Qualifying persons include:

• A dependent who’s a qualifying child and under age 13 when you pay for the care (This age limit does not apply for a child who is disabled). Usually, you must be able to claim the child as a dependent to receive the credit. However, an  exception applies for children of divorced or separated parents. In those  situations, the child is the qualifying child of the custodial parent for purposes of this credit. This may apply even if the noncustodial parent claims the child as a  dependent. 

• Spouse or dependent of any age who meets both of these criteria: Is physically or mentally incapable of self-care and has the same main home as you do when you pay for the care.

Qualified expenses

Qualified child- or dependent-care expenses are those you incur while you work (or look for  work). They should be related to well-being and protection, including: 

• Expenses for care provided outside of your home. If the qualifying person receives  care in a dependent-care center, such as a daycare facility, the center must comply  with all relevant state and local laws. A dependent-care center is one that cares for  more than six people for a fee. Day camp qualifies. Transportation, overnight camps and education of a child in kindergarten or higher doesn’t count.

• Expenses for in-home care, such as: Cooking, light housework related to the qualifying individual’s care, or payments made to the care provider. 

• If the care provider is a household employee, gross wages paid for qualified  services, plus your portion of: Social Security, Medicare, federal unemployment taxes, other payroll taxes paid on the wages and meals, and lodging for the employee providing the services.

How to claim

Luckily, to claim this credit you only need to fill out one extra tax form when completing  your tax return. Complete Form 2441: Child and Dependent Care Expenses and attach it to  your Form 1040 to claim the Child and Dependent Care Credit. 

When you claim the CDCC on your tax return, you will be required to list information about  the care provider, including their name, address, and taxpayer identification number. 

—H&R Block