The childcare credit is non-refundable. The credit of up to $3000 per child is applied to your tax liability to reduce your tax due. It is not added to your refund. If you have two or more children in daycare then the maximum credit is $6000.
Child and Dependent Care Credit:
Do I qualify?
If you paid someone to care for your child (or your disabled spouse or another dependent) while you work, you might be eligible to receive a tax credit. The credit is a percentage of your child or dependent care expenses and varies depending on your adjusted gross income (AGI).
How do I get the child and dependent care credit?
Here are the requirements you need to meet:
- You (and your spouse, if married) must have earned income, such as from a job or from running your own business.
- The child or dependent care was provided so you (and your spouse if you're married) could work or look for work. Your spouse also meets the description of working if he or he or she was a full-time student or was unable to care for himself or herself.
- The person receiving the care must have lived with you for more than six months of the tax year while living in the United States, Canada or Mexico.
- The person receiving the care was age 12 or under or qualified as mentally or physically disabled.
You can claim expenses used to care for your child or dependent, such as day care, nursery school costs, wages paid to a household employee (such as a nanny), and payments to a babysitter, maid, or cook if the payments are made for your child or dependent's well being.
About Dependents Who Were Born And Or Passed Away in 2013
A dependent who was born or passed away during the year is considered as having lived with you all year so long as your home was their home. Stillborn children cannot be claimed.
How much of a credit can I get?
- You can claim up to $3,000 in expenses per dependent with a maximum of $6,000 in expenses for two or more dependents.
- The credit is a percentage of your expenses. The percentage depends on your adjusted gross income (AGI). The higher your income is, the lower the percentage is for calculating your credit.
Example: If you earned $40,000, the percentage used to calculate your credit is 22%. If you had $3,000 in child care expenses, your credit is $660 (22% x $3,000 = $660). TurboTax makes this calculation for you.
- The credit is limited to the amount of taxes you owe on your return. That means if the credit is bigger than what you owe in taxes, the credit reduces your taxes to zero and the remainder is lost.
Example: If you owe $375 in taxes and you receive a dependent care credit of $500, the credit reduces your tax to zero on this year's return and the remaining $125 is lost. You won't receive a refund for the remaining $125.
- You cannot claim child and dependent care expenses if your care provider is someone you can claim as a dependent.
- You cannot claim child and dependent care expenses if your care provider is your child who is age 18 or under at the end of the tax year.
- You need to have the Social Security number or Employer Identification Number (EIN) for each care provider. Without this number, you won't be able to claim the credit. (This is so the IRS can make sure the care provider claims the correct amount of income.)
- You cannot claim the cost of overnight camps and schools as a valid dependent care expense. The good news is that you can claim the cost of day camps.
If one spouse is a full-time student or disabled, earned income for that person is set at $250 per month. If both of you are full-time students or disabled, your earned income is set at $500 per month.
- If you are married but not filing a joint return, then you can file a separate return and still take the credit if the child or dependent lives in your home for more than six months of the year and your spouse didn't live in your home for the last six months of the year.
TurboTip: If you and your spouse were divorced, legally separated, or lived apart the last six months of the year, then you can qualify even if the child is not a dependent on your tax return. To qualify in this scenario, you must be the custodial parent (the parent with whom the child lived with for the greater number of nights in 2013). The noncustodial parent can claim the child as a dependent according to the rules for the dependent exemption while you claim the child and dependent care credit.
What if my employer provides benefits or care?
- If you received dependent care benefits from your employer (through a pre-tax dependent care benefit plan), TurboTax reduces the expenses that you claim by the reimbursements from your employer's dependent care plan. TurboTax calculates this for you.
Example: If you had $3,000 in expenses and received $1,000 from your employer's dependent care plan, then TurboTax applies only $2,000 of your expenses toward the credit.
Note: If your employer provided child care at your workplace or directly paid your day care provider, enter zero when TurboTax asks for your dependent care expenses. In addition, if you had dependent care expenses over and above what is indicated in box 10 of your Form W-2, enter those expenses when TurboTax prompts for dependent care expenses.
What paperwork do I need for the child and dependent care credit?
To claim this credit, you'll need:
- The Social Security number and expenses incurred for each child or dependent you are claiming
- Each child care provider's name, address, and tax ID number or Social Security number, plus the amount paid to the provider
- Reimbursements received from your employer's dependent care benefit plan as shown in box 10 on your Form W-2
Keep these for your records:
- Receipts or cancelled checks for your child or dependent care expenses
**Disclaimer: Every effort has been made to offer the most correct information possible. The poster disclaims any legal responsibility for the accuracy of the information that is contained in this post.**
