The Child care Tax Credit: Limits, Benefits, and Requirements

If you pay someone to look after your children or another member of your family while you are at work, You may qualify for the Child and Dependent Care Credit.

You can reduce your tax obligation by hundreds or even thousands of dollars by using this credit.

To qualify (together with your spouse, if you are married), you must have "earned income" from a job. 

What are the requirements?

Gains from investments and other non-work income are not considered.

In order to be able to work or look for work, you must have paid for the care. 

If you are a full-time student or a parent who cannot take care of themselves, you are still considered to be working.

It is necessary to disclose the name, address, and Taxpayer Identification Number (TIN) of the person

You need to submit a joint tax return if you're married.

Who provided the care. A taxpayer identification number is either a Social Security Number (SSN)

Or an Employer Identification Number (EIN). You can ask your healthcare professional for the number.

You can claim reimbursement as long as the person you paid wasn't one of the people listed below.

What are the limits?

If, for example, you paid your ex-spouse or ex-husband to care for your children together, you wouldn't be eligible for the credit.

Your partner (spouse)

You cannot claim the credit if your 17-year-old is paid to care for their eight-year-old brother,

Tax returns that list dependents

Regardless of whether they are listed as a dependent on your tax return.

Working people can receive the Child and Dependent Care Credit to help them pay for caring for a disabled child or dependent.

What are the benefits?

This is a tax credit, not a deduction. The purpose of a tax deduction is to lower the amount of income 

That is subject to taxation. If you qualify for a $1,000 deduction, for example, 

In contrast, a tax credit lowers your taxes directly, dollar for dollar. Thanks to a $1,000 tax credit, your tax bill is reduced by $1,000.

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