You may be able to claim a credit for child and dependent care if you pay someone to care for your dependent who is under the age of 13 or for your spouse or dependent who is not able to care for himself or herself. The Child and Dependent Care Credit ranges from 20% to 35% of your expenses.
The credit is generally a percentage of the amount of work-related child and dependent care expenses you paid to a care provider. The percentage depends on your adjusted gross income. The credit is subject to limits that depend on earned income, the taxable year, and the number of qualifying individuals. These dollar limits must be reduced by the amount of any dependent care benefits provided by your employer that you may exclude from your income.
To qualify, you must pay these expenses so you can work or look for work. If you are married, both you and your spouse must have earned income. Exceptions to this are if one spouse was physically or mentally incapable of self-care or a full-time student for 5 months of the tax year.
To take the credit, your payment must be made to a care provider who is not someone you (or your spouse if you’re married) can claim as your dependent, or your child who is under age 19, even if he or she is not your dependent. Also, your payment must be made to a provider who is not your spouse or the parent of your child who is your qualifying individual.
You must provide the social security number of the qualifying individual to claim the credit. Also, you must report the name, address, and taxpayer identification number, (either the social security number or the employer identification number) of the care provider on your return. If the care provider is tax exempt, you need only report the name and address on your return. If you do not provide information regarding the care provider, you may still be eligible for the credit if you can show that you exercised due diligence in attempting to provide the required information.
Your tax preparer can provide you with more information regarding the treatment of child and dependent care expenses on your income tax return. StrataTax, a San Diego consulting and tax services firm, is available year-round to assist you with income tax preparation and tax planning. Call us at (858) 225-7720 to setup your free initial consultation or visit us at www.StrataTax.com for more information.
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