Child care or dependent expenses that can be considered tax deductible typically fall under the Child and dependent care credit some of the key expenses that may qualify:
- fees paid to daycare centers and nursery schools (as long as they provide care, not education, for the child).
- Payment to nanny, babysitter, or housekeeper who provides care services in your home.
- Cost of before and after school care programs (excluding the cost of schooling itself).
- Fees for day camps that care for children while you work or look for work. No overnight camps.
- Expenses for care provided to a disabled spouse or other dependent who lives with you and needs care while you work.
- To claim the credit, you (and your spouse, if you're married) must have income earned from a job and you must have paid for the care so that you could work or look for work.
- You can claim from 20% to 35% of your care expenses up to a maximum of $3,000 for one person, or $6,000 for two or more people (tax year 2023).
529 plans are a popular way to save for college as they may provide some tax advantages and flexibilities. There are two primary types of 529 plans:
- college savings plans: investments in this plan grow tax-deferred and can be withdrawn tax-free for qualified education expenses. They typically offer a range of investment options, such as mutual funds and can be used at any eligible college or university.
- Prepaid tuition plans: these plans allow you to purchase tuition credits at today's rates for future use. These plans are usually limited to in-state public college, but some plans have provisions for private and out-of-state colleges.
Contributions to 529 plans grow tax-deferred and can be withdrawn tax-free when used for qualified education expenses such as tuition and fees, room and board, books and supplies. Many states also offer deductions or credits on your state tax return for contributions to their 529 plans. Contributions are not deductible on your federal tax return.
To answer your last question, it is possible that your adult in-law qualifies you for an Other Dependent Tax Credit. For 2023, the maximum credit amount is $500 for each dependent who meets certain conditions. This credit can be claimed for:
- Dependents of any age, including those who are age 18 or older.
- Dependents who have Social Security numbers or Individual Taxpayer Identification numbers.
- Dependent parents or other qualifying relatives supported by the taxpayer.
- Dependents living with the taxpayer who aren't related to the taxpayer.
Keep in mind that the credit phases out after your income reaches a certain thresholds.
