If you paid someone to care for your child, spouse, or dependent (i.e., parent) this year, you may be able to claim the Child and Dependent Care Credit on your Federal income-tax return. Below are 10 things the IRS wants you to know about claiming a credit for child-and-dependent-care expenses.
1. The care must have been provided so you, and your spouse if you are filing jointly, could work or look for work.
2. The care must have been provided for one or more qualifying persons. A qualifying person is your dependent child age 12 or younger when the care was provided. Additionally, your spouse and certain other individuals who are physically or mentally incapable of self-care may also be qualifying persons. You must identify each qualifying person on your tax return.
3. You, and your spouse if you file jointly, must have earned income from wages, salaries, or net earnings from self-employment. One spouse may be considered as having earned income if they were a full-time student or were physically or mentally unable to care for themselves.
4. The payments for care cannot be paid to your spouse, to the parent of your qualifying person, to someone you can claim as your dependent on your return, or to your child who will not be 19 or older by the end of the year. Also, you must identify the care provider(s) on your tax return.
5. Your filing status must be single, married-filing-jointly, head of household or qualifying widow(er) with a dependent child. Taxpayers filing married-filing-separately usually cannot claim this credit.
6. The qualifying person must have lived with you for more than half of 2018. In a divorce or legally separated situation, if you were the child’s custodial parent (i.e., the parent with which the child lived with most of the year), you can qualify for the credit. Conversely, noncustodial parents do not qualify for the credit even if they are able to claim the child as a dependent.
7. The credit can be up to 35 percent of your qualifying expenses, depending on your adjusted gross income.
8. For 2018, 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 to figure the credit. Pre-school, nursery school, and similar pre-kindergarten programs are considered child care by the IRS. Day camps may be qualified day-care providers, but overnight camps are not.
9. Flexible spending account. If you spent $3,000 in total for dependent care and paid $1,000 of that from a workplace flexible- spending account, you are allowed to use the remaining $2,000 as a child-care tax credit.
10. If you qualify for the credit, complete IRS Form 2441, Child and Dependent Care Expenses. The care-provider’s name, address, and taxpayer identification number must be reported on this form. For additional information, please see IRS Publication 503, Child and Dependent Care Expenses.
Caution: If you pay someone to come to your home and care for your dependent or spouse, you may be a household employer and may have to withhold and pay social security and Medicare tax, and pay Federal unemployment tax. See IRS Publication 926, Household Employer’s Tax Guide.
Barry Lisak is an IRS Enrolled Agent, meaning that he has passed special U.S. Treasury Department exams that qualify him to represent clients dealing with audits or tax-resolution cases. Any questions can be directed to him at (516) TAX-SAVE, or firstname.lastname@example.org.
We depend on the support of readers like you to help keep our publication strong and independent. Join us.