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If you paid
someone to care for a qualifying person so you (and your spouse if you
are filing jointly) could work or look for work, you may be able to claim a
nonrefundable "Credit for Child and Dependent Care" expenses. If you are
married, both you and your spouse MUST have earned income, unless one
spouse was either a full-time student or was physically or mentally
incapable of self-care.
You may deduct
up to $3,000 of the qualified child and dependent care expenses paid in a
year for one qualifying individual, or $6,000 for two or more qualifying
individuals. These dollar limits must be reduced by the amount of any
dependent care benefits provided by your employer that you exclude from
your income.
The expenses
you paid MUST have been for the care of one or more of the following
qualifying person(s):
In addition to
the conditions above, you MUST meet ALL the following conditions:
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Generally, your
filing status CANNOT be "married filing separately".
However, there is an exception for married persons who may be
treated as unmarried if they did not live with their spouse at
anytime during the LAST 6 months of the tax year (calendar year
from July 1 to December 31) AND paid more than 50% of the cost of keeping up their home,
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You
MUST report the name, address, and taxpayer identification number
(either the Social Security number or Employer Identification
number) of the care provider on your tax return. Failure to
provide this information may disqualify you for the credit.
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The credit is
a percentage of eligible child and dependent care expenses, which ranges
from 20% to 35% (see table below), and is based on your adjusted gross
income. An example is also provided below.
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Child & Dependent Care Credit Percentage |
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If the adjusted gross
income is .... |
Multiply the eligible
expenses by .... |
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$0 - $15,000 |
.35 |
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$15,001 - $17,000 |
.34 |
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$17,001 - $19,000 |
.33 |
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$19,001 - $21,000 |
.32 |
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$21,001 - $23,000 |
.31 |
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$23,001 - $25,000 |
.30 |
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$25,001 - $27,000 |
.29 |
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$27,001 - $29,000 |
.28 |
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$29,001 - $31,000 |
.27 |
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$31,001 - $33,000 |
.26 |
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$33,001 - $35,000 |
.25 |
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$35,001 - $37,000 |
.24 |
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$37,001 - $39,000 |
.23 |
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$39,001 - $41,000 |
.22 |
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$41,001 - $43,000 |
.21 |
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$43,001 & UP |
.20 |
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Example:
Assume you have one child and paid $2,900 to a child care
provider. Your adjusted gross income is $33,550. Your child
care credit will be $725 ($2,900 X .25). |
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If
you pay someone to look after your dependent or spouse in YOUR
home, you may be a "Household Employer," and may have to
withhold and pay Social Security and Medicare tax. You may also
be liable for unemployment tax.
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