Get your taxes done using TurboTax

Congratulations on your growing family!  In terms of daycare expenses, there is a Child and Dependent Tax Credit, (childcare tax credit) available.  Although it’s primarily aimed at working parents and guardians, the unemployed and full-time students may also qualify for this tax credit.

If you paid for a babysitter, a summer camp,  for a child under the age of 13, or any care provider for a disabled child of any age, you could claim a tax credit of either:

• 20%-35%% of all qualifying expenses up to a maximum credit of $3,000 for one child or dependent.
• The credit also covers up to $6,000 for two or more children.

For tax year 2022, the child tax credit starts phasing out for families with a modified adjusted gross income (MAGI) above $200,000 for single filers (and $400,000 for joint filers).

There is a range of criteria that must be fulfilled to become eligible to claim this tax credit. You must meet the requirements detailed below to claim the Child and Dependent Care Credit on this year’s income tax return:

• You must have earned income. For example, if you’re married but filing jointly, then either you or your spouse must have a form of earned income.
• You must be the parent or the primary caregiver of the dependent claimed.
• The services must have been purchased to either work or search for employment.
• A qualifying child under age 13. The child or dependent must either be disabled or under the age of 13 to be claimed as a dependent for this tax credit.
• The provider of any childcare can’t be a dependent, your spouse, or a parent of the child, even if you’re paying them a salary.

Also, you may want to explore any child and dependent care plans that maybe available thru your employer, such as a Dependent Care FSA. A Dependent Care Flexible Spending Account (DCFSA) is a pre-tax benefit account used to pay for eligible dependent care expenses.  With a Dependent Care FSA, you use pre-tax dollars to pay qualified out-of-pocket-dependent care costs.  Also, the money you contribute to a Dependent Care FSA is not subject to payroll taxes, so you end up paying less in taxes and taking home more of your paycheck. Whereas, the after-tax money you use to pay for childcare expenses has been subject to payroll taxes and you do not receive a refund, tax credit or deduction for these taxes paid thru payroll.