The Child Care Tax Credit
Can Help Cut Your Child Care Costs

The child care tax credit can reduce your final child care costs. These top 10 facts from the IRS will help you determine if you are eligible to claim the credit.

IRS Tax Tip 2010-46

Did you pay someone to care for a child, spouse, or dependent last year? If so, you may be able to claim the Child and Dependent Care Credit on your federal income tax return. Below are the top 10 things the IRS wants you to know about claiming a credit for child and dependent care expenses.

• 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. You must identify each qualifying person on your tax return.

• The care must have been provided so you – and your spouse if you are married filing jointly – could work or look for work.

• You – and your spouse if you are married filing jointly – must have earned income from wages, salaries, tips, other taxable employee compensation or net earnings from self-employment.

• The payments for care cannot be paid to your spouse, to someone you can claim as your dependent on your 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.

• You must identify the care provider(s) on your tax return.

• Your filing status must be single, married filing jointly, head of household or qualifying widow(er) with a dependent child.

• The qualifying person must have lived with you for more than half of the year for which you are filing taxes.

• The credit can be up to 35 percent of your qualifying expenses, depending upon your adjusted gross income.

• For 2009, 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. This may change for 2010.

• The qualifying expenses must be reduced by the amount of any dependent care benefits provided by your employer that you deduct or exclude from your income.

• If you pay someone to come to your home and care for your dependent or spouse, you may be a household employer. If you are a household employer, you may have to withhold and pay social security and Medicare tax and pay federal unemployment tax. For information, see Publication 926, Household Employer's Tax Guide.

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