Do you pay them to watch your child while you work? The Child and Dependent Care Credit (not to be confused with the similar-sounding Child Tax Credit) can reduce your tax bill if you paid for a dependent's care so that you could work or look for work.
To qualify for this credit, you must meet all of these criteria:
- You (and your spouse, if filing jointly) must have earned income.
- The earned income requirement for one spouse is waived if s/he was a full-time student or disabled (if they lived with your spouse for more than 6 months in 2020).
- You paid caregiving expenses so that you (and your spouse, if filing jointly) could work or look for work.
- The work/look for work requirement for one spouse is waived if s/he was a full-time student or disabled (if they lived with the other spouse for more than 6 months in 2020).
- You paid a caregiver to care for a Qualifying Person. The caregiver can't be:
- Your spouse
- Your dependent
- Your child if they were under 19 on the last day of 2020, even if not your dependent
- The parent of the Qualifying Person, if the Qualifying Person is your child under the age of 13 during 2020
- You can't file with the Married Filing Separately filing status (except under certain circumstances).
- You must furnish the care provider's name, address, and (unless it's a tax-exempt organization) their SSN, ITIN, or EIN on your return.
The credit is worth anywhere from 20% to 35% of your qualified expenses, up to $3,000 (for one qualifying person) and $6,000 (for two or more qualifying persons). Your percentage depends on your AGI, with the higher percentages applying to lower incomes and vice-versa.
TurboTax will determine your eligibility and calculate the maximum credit allowed.
- Who is a Qualifying Person for the Child and Dependent Care Credit?
- How do I get to the Child and Dependent Care Credit in TurboTax?
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Yes, if you pay your cousin to watch your child while you work.
If you claim the dependent care credit, the next question is how does your cousin report her income. The answer is different depending on whether she baby sits in your home or hers.