The Child and Dependent Care Credit is a non-refundable tax credit for unreimbursed childcare expenses paid by working tax payers. The Child and Dependent Care Credit was designed to encourage taxpayers to pay childcare expenses so that they could remain gainfully employed.
The form that is needed to use, to obtain this credit is form 2441 for those taxpayers who are filing Form 1040 or Schedule 2 for those using Form 1040A.
There are some important things that families need to know about claiming the Child and Dependent Care Credit. One of the little known facts are the responsibilities involved in having someone come to your home to care for the child. You may fall under the guidelines of being a household employer. This would mean that you could be responsible for withholding and paying social security taxes, medicare taxes and federal unemployment taxes. See the Household Employer’s Tax Guide (Publication 296) before making the decision to have childcare come to you.
Here are the requirements for filing for this tax credit.
1. If filing jointly the childcare must be provided so you or your spouse could work or go looking for work.
2. The care has to provided for qualifying persons. Those who could qualify would be a dependent child 12 years old or younger. A spouse and perhaps other individuals in the household who are physically or mentally challenged and incapable of self care may also be a qualifying person. Each qualifying person must be identified on the tax forms.
3. The credit can be up to 35 percent of your qualifying expenses, depending upon your gross income.
4. You must identify all the caregivers on the tax form. You and your spouse do not qualify for payment for the care of your children. The parent of any qualifying person for care is excluded. The caregiver can not be anyone that can be claimed as a dependent on the tax form. The provider must be 19 years old or older by then of the claiming year.
5. In order to use this credit the taxpayer must file as one of the following:
* married filing jointly
* head of household
* qualifying widow/widower with a dependent child
6. Those who are filing jointly must show earned income from wages, tips, salaries, tips or other taxable compensation or net income from self employment. One spouse can be exempt from this qualification if they were a full time student or could not take care of themselves physically or mentally. For the 2010 tax year the limit of expenses is $3000.00 for one dependent and $6000.00 for two. The dependent must have lived with the tax payer at least ½ of the year.
These are the basic requirements. If all these are accurate in the tax payers situation, it is worth completing the paperwork to qualify for the tax credit.