The size of your credit is based on how much you spend for child and dependent care, as well as your income. TurboTax guides you through the process of figuring your credit and fills in the proper form for you, but in general, it works like this:
- Add up the total amount of your care expenses that qualify for the credit. The maximum amount of care expenses you're allowed to claim is $3,000 for one person, or $6,000 for two or more people.
- If your employer gives you money to pay child care expenses, or if you have money withheld from your pay on a pre-tax basis, you must subtract this money received from your allowable expenses.
- Compare your claimed expenses with your earned income and, if you're married, your spouse's earned income. Take the smallest of all these amounts. These are your "allowable expenses."
- Your credit is a percentage of your allowable expenses. That percentage ranges from 20% to 35%. The higher your income, the smaller your percentage, and therefore the smaller your credit. There is no upper limit on income for claiming the credit.
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What is the Child and Dependent Care Credit?
