You Can Claim Child Care Expenses for a Tax Credit — Do You Qualify?

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While not a well-known practice, you may be able to claim the child and dependent care credit from the IRS if you paid expenses for the care of a qualifying individual. You will only be able to claim this credit, however, if the expenses were incurred as a result of you or our spouse (if filing a joint return) working or actively looking for work. The IRS stresses that generally, you are not allowed to take this credit if you are married filing separately.

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Taking a look at Publication 503, Child and Dependent Care Expenses, you can see what qualifies as an exception for certain taxpayers living apart from their spouses and meeting all the requirements of claiming the credit.

How Is It Calculated?

The amount of the credit is a percentage of the amount of work-related expenses you paid to a care provider for your child or qualifying individual. This can mean a babysitter or daycare center, among other things. The percentage depends on your adjusted gross yearly income. That being said, the total expenses you may use to calculate the credit may not be more than $3,000 per qualifying child or dependent, or $6,000 for two or more qualifying individuals.

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It’s important to note that if you received dependent care benefits that you exclude or deduct from your income, you must subtract the amount of those benefits from the dollar limit that applies to you.

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Who Qualifies?

The IRS states that qualifying individual that can be claimed towards this credit include:

  • Your dependent qualifying child who was under age 13 when the care was provided,
  • Your spouse who was physically or mentally incapable of self-care and lived with you for more than half of the year, or
  • An individual who was physically or mentally incapable of self-care, lived with you for more than half of the year, and either: (a) was your dependent; or (b) could have been your dependent except that he or she received gross income of $4,300 or more, or filed a joint return, or you (or your spouse, if filing jointly) could have been claimed as a dependent on another taxpayer’s 2020 return.

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One other important detail to remember is that the care provider cannot be your spouse, the parent of your qualifying individual if said individual is your child and under age 13, your child who is under the age of 19 or a dependent whom you or your spouse may claim on your return.

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Last updated: August 25, 2021

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About the Author

Georgina Tzanetos is a former financial advisor who studied post-industrial capitalist structures at New York University. She has eight years of experience with concentrations in asset management, portfolio management, private client banking, and investment research. Georgina has written for Investopedia and WallStreetMojo. 
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