You may be able to deduct a percentage of child care expenses based on your adjusted gross income. To qualify for this credit, the child care must have been provided to enable you or your spouse to work or actively look for work. Child care may be at home or at an outside facility, but the expenses claimed must be specifically for the care of the qualifying individual.
You may not use the tax credit to reimburse a spouse who stays home with children. Married couples who file separately may not qualify for this credit.
If you qualify for the credit, you may claim a percentage of qualifying expenses for one or $6,000 of qualifying expenses for two or more qualifying individuals. A qualifying individual is a child younger than 13 years old at the time of care. Any dependent care benefits which have been deducted from income must be deducted from the amount claimed for a credit.
The percentages start at 35 percent of $3,000 (or $6,000 for two or more qualifying individuals) for someone with an Adjusted Gross Income of $15,000. They decrease by 1 percent for every additional $2,000 of Adjusted Gross Income, so someone with an adjusted gross income of $17,000 would calculate 34 percent of up to $3,000 (or $6,000) of qualifying expenses. The 1 percent decrease continues until it reaches 20 percent and does not continue after that.
The total amount of expenses you claim may not be more than the the smaller earned income of you or your spouse. This means that if your spouse earns less than you, the total expenses you both claim cannot be more than what your spouse earns. There are special rules if the household includes a student-spouse or a spouse incapable of self-care.
It should be noted at the outset that there is also a credit for dependent care; this article deals only with the child care aspect of this particular tax credit. For more information on the dependent care credit, see the following resources:
For the IRS page dealing with the credit, see:
https://www.irs.gov/taxtopics/tc602.html
For an IRS page helping to determine eligibility for the credit, see:
https://www.irs.gov/uac/am-i-eligible-to-claim-the-child-and-dependent-care-credit
For a good resource on better understanding the credit, see:
*This article is not intended to provide legal or financial advice. Legal decisions and taxes should be discussed with a qualified professional and accountant.
