| If you paid someone to care for a child
or a dependent so you could work, you may
be able to reduce your federal income tax
by claiming the credit for child and
dependent care expenses on your tax
return, according to the IRS. This credit
is available to people who, in order to
work or to look for work, have to pay for
child care services for dependents under
age 13. The credit is also available if
you paid for care of a spouse or a
dependent of any age who is physically or
mentally incapable of self-care.
The credit is a percentage, based on
your adjusted gross income, of the amount
of work-related child and dependent care
expenses you paid to a care provider. The
credit can range from 20 to 35 percent of
your qualifying expenses, depending upon
your income.
For 2003, you may use up to $3,000 of
the 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.
To claim the credit for child and
dependent care expenses, you must meet the
following conditions:
- You must have earned income from
wages, salaries, tips or other taxable
employee compensation, or net earnings
from self-employment. 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.
- The payments for care cannot be paid
to someone you can claim as your
dependent on your return or to your
child who is under age 19.
- Your filing status must be single,
head of household, qualifying widow(er)
with a dependent child, or married
filing jointly.
- The care must have been provided for
one or more qualifying persons
identified on the form you use to
claim the credit.
- You (and, if you’re married, your
spouse) must maintain a home that you
live in with the qualifying child or
dependent.
What is a “qualifying” child or
dependent? The child must have been under
age 13 when care was provided and you must
be able to claim the child as an exemption
on your tax return. (For an exception to
this rule, see Child of Divorced or
Separated Parents in IRS Publication 503.)
A spouse who is mentally or physically
unable to care for himself or herself also
qualifies. A dependent of any age who is
physically or mentally incapable of
self-care also qualifies if the person can
be claimed as an exemption on your tax
return (or could have been claimed, except
for the fact that the person had $3,050 or
more of gross income).
To claim the credit, you’ll need to
provide the name, address and taxpayer
identification number of the care
provider. If the provider is an
individual, you need the Social Security
number. If it’s a business, you need the
provider’s employer identification
number. You can use Form W-10, Dependent
Care Provider’s Identification and
Certification, to request this information
from the care provider. If you’re filing
Form 1040, write the care provider
information on Form 2441. If you’re
filing Form 1040A, the care provider
information goes on Schedule 2. You cannot
use Form 1040EZ if you claim the child and
dependent care credit.
As with all good things, there are some
limitations on the amount of credit you
can claim. If you received dependent care
benefits from your employer, other rules
apply. For more information on the Child
and Dependent Care Credit, see Publication
503, Child and Dependent Care Expenses, or
Chapter 33 of Publication 17, Your Federal
Income Tax. You may download these free
publications from this Web site or order
them by calling toll free 1-800-TAX-FORM
(1-800-829-3676).
Related Items:
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Form
W-10, Dependent Care Provider’s
Identification and Certification
(PDF 31K)
-
Form
2441, Child and Dependent Care
Expenses (PDF 59K)
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