Working with Child Care Tax Credit

Unfortunately, most of us have to work for a living. While you may hate to leave your children in day care, or under someone else’s care, the federal government wants to ease your pain by allowing you to claim a tax credit for money you spend on day care and/or child care services

You may be eligible to claim the Child & Dependent Care Tax Credit if you have met the following requirements:

• The care must have been provided for one or more qualifying persons. This would include a dependent child who was 12 or younger when the care was provided as well as an individual who is physically or mentally incapable of self-care and requires the full-time attention of another person for the individual's own safety or the safety of others. Each qualifying person must be identified on your tax return with their Social Security number.
• The care must have been provided so you (and your spouse if you are married filing jointly) could work (part time or full time) or look for work. So, if one of you is unemployed and looking for work, you can still qualify. In addition, if one spouse is a full-time student, or physically or mentally unable to care for themselves, you can also qualify.
• The care cannot be provided by a spouse, or someone you can claim as your dependent on your tax return, or to your child who will not be age 19 or older by the end of the year even if he or she is not your dependent. The care provider(s) must be identified on your tax return.
• Your filing status must be single, married filing jointly, head of household or qualifying widow (er) with a dependent child. Therefore, you must file jointly if you are married to qualify for this credit.
• The qualifying person must have lived with you for more than half of 2010. There are some exceptions for the birth or death of a qualifying person, or a child of divorced or separated parents.
• The credit can be up to 35 percent of your qualifying expenses, depending upon your adjusted gross income.
• To figure the credit, you may use up to $3,000 of expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals.
• If your employer provides dependent care benefits, the qualifying expenses must be reduced by that amount.
• On your tax return, you must note the name, address, and taxpayer identification number, (either the social security number, or the employer identification number) of the care provider. So, if you pay someone to come to your home to provide care, you might be considered a household employer. Be sure to withhold and pay social security and Medicare tax and pay federal unemployment tax.