Often times a major financial burden to people with young children is paying for their care. The good news is there is some relief. This credit is available to almost anyone who has a dependent and has earned income. This credit is designed to ultimately help offset the costs of their care while you work. This credit is NOT to be confused with the child tax credit.
Here are the basics of the credit:
- You must have at least one child who cannot provide their own care. Generally, the child must be under the age of 13 but there are specific exceptions to the general rule.
- You and your spouse, if you have one, must be working and receiving an income to qualify for this tax credit. (unless one of you is unable to provide care, for example if you are on disability)
- You must have paid a qualifying provider. Adult or older children supervising younger children do not qualify. You must provide the name, address and TIN of the care provider on your return.
- In the case of divorce or separation, only one parent may claim the child and dependent care credit and that is the custodial parent. Splitting the credit is not allowed because for this credit there is no such thing as joint custody. The requirement to be the custodial parent is that the child live with you MORE than 50% of the time. It is NOT necessary that you claim the child as a dependent, even if you are the custodial parent.
For specific qualification scenarios and questions, is it always best to check the IRS’s official website or contact your trusted accountant.